As filed with the Securities and Exchange Commission on October 22, 1998
1933 Act Registration No. 33-64368
1940 Act Registration No. 811-7784
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
-----
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 17 ] [ X ]
and/or ---- ----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----
Amendment No. [ 15 ] [ X ]
---- -----
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY TRUST
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to paragraph (b)
__ on _______________, pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
X on December 21, 1998, pursuant to paragraph (a)(1)
- --
Neuberger Berman Equity Trust is a "master/feeder fund." This
Post-Effective Amendment No. 17 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 17 on Form N-1A
Cross Reference Sheets
Neuberger Berman Focus Trust
Neuberger Berman Genesis Trust
Neuberger Berman Guardian Trust
Neuberger Berman International Trust
Neuberger Berman Manhattan Trust
Neuberger Berman Millennium Trust
Neuberger Berman Partners Trust
Part A - Prospectus
Part B - Statement of Additional Information
NEUBERGER BERMAN GENESIS TRUST
Part A - Prospectus
NEUBERGER BERMAN GUARDIAN TRUST
Part A - Prospectus
Part B - Statement of Additional Information
NEUBERGER BERMAN NYDC SOCIALLY RESPONSIVE TRUST
Part A - Prospectus
Part B - Statement of Additional Information
Neuberger Berman Focus Trust
Neuberger Berman Genesis Trust
Neuberger Berman Guardian Trust
Neuberger Berman International Trust
Neuberger Berman Manhattan Trust
Neuberger Berman Millennium Trust
Neuberger Berman NYCDC Socially Responsive Trust
Part C - Other Information
Signature Pages
Exhibits
-2-
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus and Statement
of Additional Information for:
NEUBERGER BERMAN FOCUS TRUST
NEUBERGER BERMAN GENESIS TRUST
NEUBERGER BERMAN GUARDIAN TRUST
NEUBERGER BERMAN INTERNATIONAL TRUST
NEUBERGER BERMAN MANHATTAN TRUST
NEUBERGER BERMAN MILLENNIUM TRUST
NEUBERGER BERMAN PARTNERS TRUST
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
Item 1. Front and Back Cover Front and Back Cover Page
Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Front Cover Page; Management Sidebar
Organization, and
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Financial Highlights
Information
Caption in Part B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Cover and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
-3-
<PAGE>
Item 13. Management of the Fund Trustees And Officers
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption, Additional Purchase Information;
and Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
-4-
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus for:
NEUBERGER BERMAN GENESIS TRUST
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
Item 1. Front and Back Cover Front and Back Cover Page
Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Front Cover Page; Management Sidebar
Organization, and
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Financial Highlights
Information
-5-
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for:
NEUBERGER BERMAN GUARDIAN TRUST
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
Item 1. Front and Back Cover Front and Back Cover Page
Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Front Cover Page; Management Sidebar
Organization, and
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Financial Highlights
Information
Caption in Part B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Cover and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
Item 13. Management of the Fund Trustees And Officers
-6-
<PAGE>
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption, Additional Purchase Information;
and Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
-7-
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus and Statement
of Additional Information for:
NEUBERGER BERMAN NYDC SOCIALLY RESPONSIVE TRUST
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
Item 1. Front and Back Cover Front and Back Cover Page
Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Front Cover Page; Management Sidebar
Organization, and
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Financial Highlights
Information
Caption in Part B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Cover and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
Item 13. Management of the Fund Trustees And Officers
-8-
<PAGE>
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
Item 15. Investment Advisory and Investment Management and Administration
Other Services Services; Trustees And Officers;
Distribution Arrangements; Reports To
Shareholders; Custodian And Transfer
Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption, Additional Purchase Information;
and Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
17.
-9-
<PAGE>
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY TRUSTS
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 21, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Focus Trust
Genesis Trust
Guardian Trust
International Trust
Manhattan Trust
Millennium Trust
Partners Trust
Socially Responsive Trust
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY TRUSTS
PAGE 2 ...... Focus Trust
8 ...... Genesis Trust
14 ...... Guardian Trust
20 ...... International Trust
26 ...... Manhattan Trust
32 ...... Millennium Trust
36 ...... Partners Trust
42 ...... Socially Responsive Trust
YOUR INVESTMENT
48 ...... Maintaining Your Account
50 ...... Share Prices
51 ...... Distributions and Taxes
53 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
All of the Neuberger Berman Equity Trusts are managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage more than $49 billion in total assets and continue an
asset management history that began in 1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
THESE FUNDS:
- - ARE DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAVE NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAVE NO DISTRIBUTION (12b-1)
FEES
- - OFFER YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH
PROFESSIONALLY MANAGED STOCK PORTFOLIOS
- - ALSO OFFER THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH FUNDS THAT INVEST
USING A VALUE OR A GROWTH APPROACH, OR A COMBINATION OF THE TWO
- - CARRY CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU SELL
FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - ARE MUTUAL FUNDS, NOT BANK DEPOSITS, AND ARE NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
FOCUS TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBFCX ABOVE: PORTFOLIO MANAGER KENT C. SIMONS
"OUR INVESTMENT APPROACH FOR FOCUS TRUST INVOLVES LOOKING FOR COMPANIES THAT
HAVE LOW PRICE-TO-EARNINGS RATIOS, SOLID BALANCE SHEETS AND STRONG MANAGEMENT.
WE OFTEN FIND THAT THESE COMPANIES ARE CONCENTRATED IN CERTAIN SECTORS OF THE
ECONOMY, AND WE LOOK FURTHER WITHIN THESE SECTORS FOR OTHER COMPANIES THAT MEET
OUR CRITERIA."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
INDUSTRY SECTORS
The economy is divided into sectors, each made up of related industries. By
focusing on several sectors at a time, a fund can add a measure of
diversification and still allow the potential for performance.
This contrasts with an approach of limiting investment to one sector, which may
offer greater opportunity but also more risk. A sector may have above-average
performance during particular periods, but individual sectors also tend to move
up and down more than the broader market.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
companies of any size that fall within the following sectors:
- - autos and housing
- - consumer goods and services
- - defense and aerospace
- - energy
- - financial services
- - health care
- - heavy industry
- - machinery and equipment
- - media and entertainment
- - retailing
- - technology
- - transportation
- - utilities
At any given time, the fund intends to place most of its assets in those sectors
on the list that the manager believes are undervalued. The fund generally
invests at least 90% of net assets in no more than six sectors. However, it does
not invest more than 50% of total assets in any one sector, or more than 25% of
total assets in any one industry.
The manager looks for undervalued companies. Factors in identifying these firms
may include above-average returns, an established market niche, and sound future
business prospects. This approach is designed to let the fund benefit from
potential increases in stock prices while limiting the risks typically
associated with investing in a small number of sectors.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Focus Trust 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Because the fund typically focuses on a few sectors at a time, its performance
is likely to be disproportionately affected by the factors influencing those
sectors. These may include market, economic, political, or regulatory
developments, among others. The fund's performance may also suffer if a sector
does not perform as the portfolio manager expected.
To the extent that the fund emphasizes any particular size of stock, it takes on
the associated risks. Mid- and small-cap stocks tend to be riskier than
large-cap stocks; over time, however, large-cap stocks may perform better or
less well than mid- and small-cap stocks. At any given time, one size of stock
may be out of favor with investors. If the fund emphasizes that size, it could
perform less well than certain other funds.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the manager failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing heavily in energy stocks prior to
November 1991, and invested mainly in large-cap stocks prior to September 1998,
its performance during those times would have been different if current policies
had been in effect.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1955; in the chart and table below, performance results for periods before
August 1993 are those of the older fund. Because the older fund had slightly
lower expenses, its performance was slightly better than your fund would have
realized in the same period. This information is based on past performance; it's
not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 16.47%
89 29.78%
90 -5.92%
91 24.66%
92 21.10%
93 19.60%
94 0.93%
95 36.03%
96 16.29%
97 24.15%
BEST QUARTER: Q2 '97, up 16.90%
WORST QUARTER: Q3 '90, down 9.07%
Year-to-date performance as of 9/30/98: down
15.87%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
FOCUS TRUST 24.15 18.84 17.67
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Focus Trust 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
KENT C. SIMONS is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has managed the fund's assets since 1988.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.88% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.88
PLUS: Distribution (12b-1) fees None
Other expenses 0.09
....
EQUALS: Total annual operating expenses 0.97
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
ITS TOTAL ANNUAL OPERATING EXPENSES ARE NOT MORE THAN 0.10% ABOVE THOSE OF
ANOTHER NEUBERGER BERMAN FUND THAT INVESTS IN THE SAME PORTFOLIO OF
SECURITIES. THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES. UNDER THIS ARRANGEMENT, WHICH
NEUBERGER BERMAN MANAGEMENT CAN TERMINATE UPON SIXTY DAYS' NOTICE TO THE FUND,
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND LAST YEAR WERE LIMITED TO 0.94% OF
THE FUND'S AVERAGE NET ASSETS. ACTUAL EXPENSES THIS YEAR MAY BE HIGHER OR
LOWER.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $99 $309 $536 $1190
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$96, $300, $520, AND $1155, RESPECTIVELY.
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.03 11.36 14.41 14.83 21.27
PLUS: Income from investment operations
Net investment income 0.05 0.05 0.06 0.01 0.03
Net gains/losses -- realized and unrealized 1.31 3.05 0.46 6.49 (3.66)
Subtotal: income from investment operations 1.36 3.10 0.52 6.50 (3.63)
MINUS: Distributions to shareholders
Income dividends 0.02 0.05 0.02 0.06 0.01
Capital gain distributions 0.01 -- 0.08 -- 0.49
Subtotal: distributions to shareholders 0.03 0.05 0.10 0.06 0.50
...........................................
EQUALS: Share price (NAV) at end of year 11.36 14.41 14.83 21.27 17.14
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.85 0.96 0.99 0.96 0.94
Gross expenses(1) 2.50 2.50 1.27 1.06 0.97
Expenses(2) -- -- 0.99 0.96 0.94
Net investment income -- actual 0.92 0.67 0.63 0.11 0.17
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(3) (%) 13.58 27.44 3.62 43.93 (17.45)
Net assets at end of year (in millions of dollars) 1.6 14.5 55.6 160.9 193.2
Portfolio turnover rate (%) 52 36 39 63 64
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Focus Trust 7
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GENESIS TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBGEX ABOVE: PORTFOLIO MANAGERS JUDITH M. VALE AND
ROBERT W. D'ALELIO
"WE SEEK OUT SMALL COMPANIES THAT ARE LITTLE-KNOWN AND OFTEN ARE IN LESS
GLAMOROUS INDUSTRIES. FUTURE GROWTH IS ONE AREA WE FOCUS ON, BUT EQUALLY
IMPORTANT TO US IS EVIDENCE OF SOLID PERFORMANCE AND A PROVEN MANAGEMENT TEAM.
AND AS VALUE INVESTORS, WE LOOK FOR STOCKS THAT ARE SELLING AT ATTRACTIVE
PRICES."
8
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based
on earnings, book value, or other financial measures. The value investor
examines these companies, searching for those that may rise in price before
other investors realize their worth.
[ARROW]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers look for undervalued companies whose current product lines and
balance sheets are strong. Factors in identifying these firms may include:
- - above-average returns
- - an established market niche
- - circumstances that would make it difficult for new competitors to enter the
market
- - the ability to finance their own growth
- - sound future business prospects
This approach is designed to let the fund benefit from potential increases in
stock prices while limiting the risks typically associated with small-cap
stocks.
At times, the managers may emphasize certain industries that they believe will
benefit from market or economic trends.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Genesis Trust 9
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Stock prices of many smaller companies are based on future expectations. The
portfolio managers tend to focus on companies whose financial strength is
largely based on existing business lines rather than projected growth. While
this can help reduce risk, the fund is still subject to many of the risks of
small-cap investing. These include the risk that the fund's holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of a given sector that the managers
decided to focus on
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
10 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1988; in the chart and table below, performance results for periods before
August 1993 are those of the older fund. Because the older fund had slightly
lower expenses, its performance was slightly better than your fund would have
realized in the same period. This information is based on past performance; it's
not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89 17.25%
90 -16.24%
91 41.55%
92 15.62%
93 14.37%
94 -1.66%
95 27.17%
96 29.90%
97 34.86%
BEST QUARTER: Q1 '91, up 25.05%
WORST QUARTER: Q3 '90, down 21.81%
Year-to-date performance as of 9/30/98: down
17.19%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years 9/27/88
<S> <C> <C> <C>
- -------------------------------------------------------------------
GENESIS TRUST 34.86 20.17 16.64
Russell 2000 Index 22.36 16.40 14.46
</TABLE>
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
Genesis Trust 11
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JUDITH M. VALE is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. A senior member of the Small Cap Group since
1992, she has co-managed the fund's assets since 1994.
ROBERT W. D'ALELIO is a Vice President of Neuberger Berman Management. A senior
member of the Small Cap Group since joining the firm in 1996, he has co-managed
the fund's assets since 1997. From 1988 to 1996, he was a senior portfolio
manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 1.09% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 0.08
....
EQUALS: Total annual operating expenses 1.19
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $121 $378 $654 $1443
</TABLE>
12 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.05 10.59 12.65 14.99 21.45
PLUS: Income from investment operations
Net investment income (loss) (0.01) (0.01) (0.02) (0.01) 0.12
Net gains/losses -- realized and unrealized 0.56 2.08 2.68 6.61 (4.14)
Subtotal: income from investment operations 0.55 2.07 2.66 6.60 (4.02)
MINUS: Distributions to shareholders
Capital gain distributions 0.01 0.01 0.32 0.14 0.15
Subtotal: distributions to shareholders 0.01 0.01 0.32 0.14 0.15
...........................................
EQUALS: Share price (NAV) at end of year 10.59 12.65 14.99 21.45 17.28
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income (loss) -- as they actually are as well as how
they would have been if certain expense reimbursement/waiver and offset arrangements had not been in effect.
Net expenses -- actual 1.36 1.42 1.38 1.25 1.17
Gross expenses(1) 2.50 1.78 1.65 1.35 1.19
Expenses(2) -- -- 1.38 1.26 1.17
Net investment income (loss) -- actual (0.21) (0.24) (0.27) (0.16) 0.68
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(3) (%) 5.47 19.51 21.44 44.31 (18.88)
Net assets at end of year (in millions of dollars) 3.1 30.6 65.2 382.7 704.5
Portfolio turnover rate (%) 63 37 21 18 18
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT/WAIVER.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS; THE MANAGEMENT FEE WAIVER IS INCLUDED, HOWEVER. THIS
CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER 9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES AND/ OR WAIVED A PORTION OF THE MANAGEMENT FEE.
Genesis Trust 13
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GUARDIAN TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBGTX ABOVE: PORTFOLIO MANAGERS ALLAN "RICK" WHITE
AND KEVIN L. RISEN
"WITH GUARDIAN TRUST WE LOOK FOR ESTABLISHED COMPANIES THAT ARE EITHER 'UNDER A
ROCK' OR 'UNDER A CLOUD' -- MEANING THAT THEY'RE EITHER NOT WELL FOLLOWED ON
WALL STREET OR THEY'RE TEMPORARILY OUT OF FAVOR WITH OTHER INVESTORS. IT'S VERY
MUCH A CONTINUATION OF THE CLASSIC VALUE APPROACH THE FUND HAS USED SINCE ITS
FOUNDING IN 1950."
14
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
LARGE-CAP STOCKS
Large companies are usually well-established. They may have a variety of
products and business lines and a sound financial base that can help them
weather bad times.
Compared to smaller companies, large companies can be less responsive to changes
and opportunities. At the same time, their returns have sometimes led those of
smaller companies, often with lower volatility.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A
SECONDARY GOAL.
To pursue these goals, the fund invests mainly in common stocks of
large-capitalization companies. The fund seeks to reduce risk by diversifying
among a large number of companies across many different industries and economic
sectors, and by managing its overall exposure to a wide variety of risk factors.
The managers look for well managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - solid balance sheets
- - above-average returns
- - low price-to-earnings ratios
- - consistent earnings
Because the managers tend to find that undervalued stocks may be more common in
certain sectors of the economy at a given time, the fund may emphasize those
sectors.
The fund has paid an income dividend every quarter, and a capital gain
distribution every year, since December 1993, the year of the fund's inception.
Of course, it cannot guarantee that it will continue to do so.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Guardian Trust 15
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
At times, large-cap stocks may lag other types of stocks in performance, which
could cause the fund to perform less well than certain other funds. While they
may at times be less risky than small-cap stocks, large-cap stocks may perform
better or less well over time.
To the extent that a value approach dictates an emphasis on certain sectors of
the market at any given time, the fund's performance is likely to be
disproportionately affected by the economic, market, and other developments that
may influence those sectors. The fund's performance may also suffer if a sector
does not perform as the portfolio managers expected.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
16 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how performance
has varied from year to year. The table below the chart shows what the
returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1950; in the chart and table below, performance results for periods before
August 1993 are those of the older fund. Because the older fund had slightly
lower expenses, its performance was slightly better than your fund would have
realized in the same period. This information is based on past performance; it's
not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 28.05%
89 21.50%
90 -4.71%
91 34.33%
92 19.01%
93 13.52%
94 1.52%
95 31.99%
96 17.74%
97 17.83%
BEST QUARTER: Q1 '91, up 17.42%
WORST QUARTER: Q3 '90, down 15.76%
Year-to-date performance as of 9/30/98: down
16.88%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GUARDIAN TRUST 17.83 16.11 17.46
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Guardian Trust 17
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
KEVIN L. RISEN is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has co-managed the fund's assets since
1996. He joined Neuberger Berman in 1992 as an analyst, and has been a portfolio
manager since 1995.
ALLAN R. WHITE III is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since September 1998, when he joined the firm. From
1989 to 1998 he was a portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.84% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.84
PLUS: Distribution (12b-1) fees None
Other expenses 0.03
....
EQUALS: Total annual operating expenses 0.87
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $89 $278 $482 $1073
</TABLE>
18 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.27 11.27 13.83 14.24 19.47
PLUS: Income from investment operations
Net investment income 0.09 0.13 0.16 0.08 0.09
Net gains/losses -- realized and unrealized 0.99 2.55 0.55 5.48 (3.93)
Subtotal: income from investment operations 1.08 2.68 0.71 5.56 (3.84)
MINUS: Distributions to shareholders
Income dividends 0.07 0.12 0.14 0.10 0.10
Capital gain distributions 0.01 -- 0.16 0.23 1.29
Subtotal: distributions to shareholders 0.08 0.12 0.30 0.33 1.39
...........................................
EQUALS: Share price (NAV) at end of year 11.27 13.83 14.24 19.47 14.24
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.80 0.90 0.92 0.88 0.87
Gross expenses(1) 1.52 0.96 0.92 -- --
Expenses(2) -- -- 0.92 0.88 0.87
Net investment income -- actual 1.50 1.35 1.26 0.47 0.50
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 10.57(3) 24.01(3) 5.19(3) 39.56 (20.88)
Net assets at end of year (in millions of dollars) 75.8 683.1 1,340.1 2,269.8 1,529.5
Portfolio turnover rate (%) 24 26 37 50 60
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) Would have been lower if Neuberger Berman Management had not reimbursed
certain expenses.
Guardian Trust 19
<PAGE>
[PHOTO]
NEUBERGER BERMAN
INTERNATIONAL TRUST
- --------------------------------------------------------------------------------
ABOVE: PORTFOLIO MANAGER VALERIE CHANG
"IN IDENTIFYING ATTRACTIVE STOCKS FROM AMONG THE MANY
THOUSANDS CURRENTLY AVAILABLE OUTSIDE THE U.S., IT'S IMPORTANT TO
HAVE A CLEAR STRATEGY. THIS FUND USES A COMBINATION OF GROWTH
AND VALUE CRITERIA, WHILE ALSO CONSIDERING LARGER SCALE ECONOMIC FACTORS."
20
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
FOREIGN STOCKS
There are many promising opportunities for investment outside the U.S. These
foreign markets often respond to different factors, and therefore tend to follow
cycles that are different from each other.
For this reason, many investors put a portion of their portfolios in foreign
investments as a way of gaining further diversification. While foreign stock
markets can be risky, investors gain an opportunity to add potential long-term
growth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
COMMON STOCKS OF FOREIGN COMPANIES.
To pursue this goal, the fund invests mainly in foreign companies of any size,
including companies in developed and emerging industrialized markets. The fund
defines a foreign company as one that is organized outside of the United States
and conducts the majority of its business abroad.
The fund seeks to reduce risk by diversifying among many industries. Although it
has the flexibility to invest a significant portion of its assets in one country
or region, it generally intends to remain well-diversified across countries and
geographical regions.
In picking stocks, the manager looks for well-managed companies that show
potential for above-average growth or whose stock prices are undervalued.
Factors in identifying these firms may include strong fundamentals, such as
attractive cash flows and balance sheets, as well as prices that are reasonable
in light of projected earnings growth. The manager also considers the outlooks
for various countries and regions around the world, examining economic, market,
social, and political conditions.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
International Trust 21
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. The fund may use derivatives for hedging and for speculation. Hedging
could reduce the fund's losses from currency fluctuations, but could also reduce
its gains. A derivative instrument could fail to perform as expected. Any
speculative investment could cause a loss for the fund.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in international stock markets. The behavior of these
markets is unpredictable, particularly in the short term. Because of
this, the value of your investment will rise and fall, sometimes sharply, and
you could lose money.
Foreign stocks are riskier than comparable U.S. stocks. This is in part because
foreign markets are less developed and foreign governments, economies, laws, tax
codes and securities firms may be less stable. There is also a higher chance
that key information will be unavailable, incomplete, or inaccurate. As a
result, foreign stocks can fluctuate more widely in price than comparable U.S.
stocks, and they may also be less liquid. These risks are generally greater in
emerging markets. Over a given period of time, foreign stocks may underperform
U.S. stocks -- sometimes for years. The fund could also underperform if the
manager invests in the wrong countries or regions.
Changes in currency exchange rates bring an added dimension of risk. Currency
fluctuations could erase investment gains or add to investment losses.
To the extent that the fund invests in growth stocks or in value stocks, it
takes on the risks associated with both types of stocks. Growth stocks may
suffer more than value stocks during market downturns, while value stocks may
remain undervalued. Either type of stock may underperform the other during a
given period.
22 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing primarily in mid- and large-cap
stocks prior to September 1998, its performance during that time would have been
different if current policies had been in effect.
[ARROW] The bar chart below shows how performance
has varied from year to year. The table below the chart shows what the
returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since June 1998.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1994; in the chart and table below, performance results for periods before
June 1998 are those of the older fund. Because the older fund had slightly lower
expenses, its performance was slightly better than your fund would have realized
in the same period. This information is based on past performance; it's not a
prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 7.88%
96 23.69%
97 11.21%
BEST QUARTER: Q2 '97, up 9.30%
WORST QUARTER: Q4 '97, down 8.67%
Year-to-date performance as of 9/30/98: down
11.89%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 6/15/94
<S> <C> <C>
- --------------------------------------------------------------
INTERNATIONAL TRUST 11.21 11.54
EAFE Index 2.06 5.38
</TABLE>
The EAFE is an unmanaged index of stocks from Europe, Australasia, and the Far
East.
International Trust 23
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
VALERIE CHANG is an Assistant Vice President of Neuberger Berman Management. In
1996 she joined the firm and became assistant manager of the fund. She has been
the manager since 1997. She began her career in 1990 in banking, and from 1995
to 1996 was a senior securities analyst at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 1.25% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.25
PLUS: Distribution (12b-1) fees None
Other expenses 0.67
....
EQUALS: Total annual operating expenses 1.92
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 1.70% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT CAN BE TERMINATED UPON SIXTY DAYS' NOTICE
TO THE FUND. IN ADDITION, THE ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $195 $603 $1037 $2243
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$173, $536, $923 AND $2009, RESPECTIVELY.
24 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1998(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout the period indicated. You can see what the fund
earned (or lost), what it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of period 17.13
PLUS: Income from investment operations
Net investment loss (0.02)
Net gains/losses -- realized and unrealized (3.24)
Subtotal: income from investment operations (3.26)
.........
EQUALS: Share price (NAV) at end of year 13.87
- ----------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment loss -- as they actually are as
well as how they would have been if certain expense reimbursement and offset
arrangements had not been in effect.
Net expenses -- actual 1.70(2)
Gross expenses(3) 6.02(2)
Expenses(4) 1.70(2)
Net investment loss -- actual (0.54)(2)
- ----------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over the period,
assuming all distributions were reinvested. The turnover rate reflects how actively the
fund bought and sold securities.
Total return (%) (19.03)(5)(6)
Net assets at end of year (in millions of dollars) 1.8
Portfolio turnover rate (%) 46
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 6/29/98 (BEGINNING OF OPERATIONS) TO 8/31/98.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
International Trust 25
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MANHATTAN TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBMTX ABOVE: PORTFOLIO MANAGERS JENNIFER K. SILVER
AND BROOKE A. COBB
"WITHOUT QUESTION, WE ARE GROWTH INVESTORS. WE LOOK FOR COMPANIES THAT WE THINK
WILL DELIVER POSITIVE EARNINGS SURPRISES, PARTICULARLY THOSE WITH THE POTENTIAL
TO DO SO CONSISTENTLY. IDEALLY, WE WANT TO IDENTIFY COMPANIES THAT WILL SOMEDAY
RANK AMONG THE FORTUNE 500."
26
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID-CAP STOCKS
Mid-cap stocks have historically shown risk/return characteristics that are in
between those of small- and large-cap stocks. Their prices can rise and fall
substantially, although they have the potential to offer comparatively
attractive long-term returns.
Mid-caps are less widely followed on Wall Street than large-caps, which can make
it comparatively easier to find attractive stocks that are not overpriced.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[ARROW]
THE FUND SEEKS GROWTH OF CAPITAL. INCOME IS NOT A CONSIDERATION.
To pursue this goal, the fund invests mainly in common stocks of
mid-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for fast-growing companies that are in new or rapidly evolving
industries. Factors in identifying these firms may include:
- - above-average growth of earnings
- - earnings that have exceeded analysts' expectations
The managers may also look for other characteristics in a company, such as
financial strength, a strong position relative to competitors and a stock price
that is reasonable in light of its growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Manhattan Trust 27
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on mid-cap stocks, the fund is subject to their risks, including the
risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected. To the extent
that the managers sell stocks before they reach their market peak, the fund may
miss out on opportunities for higher performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
28 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index as well
as a more focused index of mid-cap growth stocks. The fund's performance figures
include all of its expenses; the indices do not include costs of investment.
Because the fund had a policy of investing in stocks of all capitalizations and
used a comparatively more value-oriented investment approach prior to July 1997,
its performance would have been different if current policies had been in
effect.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, Neuberger Berman Management has acted as investment adviser to another
Neuberger Berman fund, which is not offered in this prospectus but which invests
in the same portfolio of securities, since 1979; in the chart and table below,
performance results for periods before August 1993 are those of the older fund.
Because the older fund had slightly lower expenses, its performance was slightly
better than your fund would have realized in the same period. This information
is based on past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 18.31%
89 29.09%
90 -8.05%
91 30.89%
92 17.77%
93 10.02%
94 -3.43%
95 30.82%
96 9.74%
97 29.33%
BEST QUARTER: Q1 '91, up 14.75%
WORST QUARTER: Q3 '90, down 15.88%
Year-to-date performance as of 9/30/98: down
8.97%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
MANHATTAN TRUST 29.33 14.55 15.62
Russell Midcap Growth Index 22.54 15.98 16.80
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The Russell Midcap Growth is an unmanaged index of U.S. mid-cap growth stocks.
The S&P 500 is an unmanaged index of U.S. stocks.
Manhattan Trust 29
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Currently the Director of the Growth Equity
Group, she has been co-manager of the fund since joining the firm in 1997. From
1986 to 1997, she was an analyst and a portfolio manager at another firm.
BROOKE A. COBB is a Vice President of Neuberger Berman Management. He has been
co-manager of the fund since joining the firm in 1997. From 1972 to 1997, he was
a portfolio manager at several other firms.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.93% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.93
PLUS: Distribution (12b-1) fees None
Other expenses 0.22
....
EQUALS: Total annual operating expenses 1.15
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
ITS TOTAL ANNUAL OPERATING EXPENSES ARE NOT MORE THAN 0.10% ABOVE THOSE OF
ANOTHER NEUBERGER BERMAN FUND THAT INVESTS IN THE SAME PORTFOLIO OF
SECURITIES. THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES. UNDER THIS ARRANGEMENT, WHICH
NEUBERGER BERMAN MANAGEMENT CAN TERMINATE UPON SIXTY DAYS' NOTICE TO THE FUND,
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND LAST YEAR WERE LIMITED TO 1.04% OF
THE FUND'S AVERAGE NET ASSETS. ACTUAL EXPENSES THIS YEAR MAY BE HIGHER OR
LOWER.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $117 $365 $633 $1398
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$106, $331, $574 AND $1271, RESPECTIVELY.
30 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.01 10.37 12.99 12.18 15.77
PLUS: Income from investment operations
Net investment income (loss) 0.01 -- (0.04) (0.04) (0.07)
Net gains/losses -- realized and unrealized 0.36 2.67 (0.34) 4.55 (1.40)
Subtotal: income from investment operations 0.37 2.67 0.38 4.51 (1.47)
MINUS: Distributions to shareholders
Income dividends 0.01 0.01 -- -- --
Capital gain distributions -- 0.04 0.43 0.92 2.69
Subtotal: distributions to shareholders 0.01 0.05 0.43 0.92 2.69
...........................................
EQUALS: Share price (NAV) at end of year 10.37 12.99 12.18 15.77 11.61
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income (loss) -- as they actually are as well as how
they would have been if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.96 1.06 1.08 1.09 1.04
Gross expenses(1) 2.50 1.46 1.25 1.23 1.15
Expenses(2) -- -- 1.08 1.09 1.04
Net investment income (loss) -- actual 0.16 (0.03) (0.38) (0.30) (0.52)
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(3) (%) 3.70 25.90 (2.98) 38.84 (11.23)
Net assets at end of year (in millions of dollars) 12.1 35.6 48.2 51.1 46.1
Portfolio turnover rate (%) 50 44 53 89 90
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Manhattan Trust 31
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MILLENNIUM TRUST
- --------------------------------------------------------------------------------
ABOVE: PORTFOLIO MANAGERS MICHAEL F. MALOUF
AND JENNIFER K. SILVER
"WE MAKE IT OUR BUSINESS TO TRACK DOWN PROMISING SMALL-CAP COMPANIES WHEREVER
THEY MAY BE. AS A RESULT, THIS FUND ENABLES INVESTORS WHO CAN ACCEPT THE RISKS
OF SMALL-CAP STOCKS TO PURSUE THE POTENTIAL FOR LONG-TERM GROWTH THAT SMALL-CAPS
MAY PROVIDE."
32
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[ARROW]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers take a growth approach to selecting stocks, looking for new
companies that are in the developmental stage as well as older companies that
appear poised to grow because of new products, markets or management. Factors in
identifying these firms may include financial strength, a strong position
relative to competitors and a stock price that is reasonable in light of its
growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Millennium Trust 33
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on small-cap stocks, the fund is subject to many of their risks,
including the risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks, especially when the market or the economy
is not robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of those sectors in which small-cap
growth stocks may be concentrated
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
34 Neuberger Berman
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL F. MALOUF is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since its inception in 1998, the year he joined the
firm. From 1991 to 1998 he was a portfolio manager at another firm.
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Director of the Growth Equity Group, since
1997, she has been co-manager of the fund since 1998. From 1986 to 1997, she was
an analyst and a portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.25
PLUS: Distribution (12b-1) fees None
Other expenses 1.20
....
EQUALS: Total annual operating expenses 2.45
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 1.75% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT CAN BE TERMINATED UPON SIXTY DAYS' NOTICE
TO THE FUND. IN ADDITION, THE ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses** $248 $764
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE- AND THREE-YEAR PERIODS WOULD BE $178 AND $551,
RESPECTIVELY.
BECAUSE THE FUND IS NEW IT DOES NOT HAVE PERFORMANCE OR FINANCIAL HIGHLIGHTS TO
REPORT.
Millennium Trust 35
<PAGE>
[PHOTO]
NEUBERGER BERMAN
PARTNERS TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBPTX ABOVE: PORTFOLIO MANAGERS MICHAEL M. KASSEN,
ROBERT I. GENDELMAN AND S. BASU MULLICK
"OUR MANAGEMENT APPROACH FOCUSES ON FINDING UNDERVALUED COMPANIES. IN
PARTICULAR, WE LOOK FOR 'FALLEN ANGELS' -- GROWTH STOCKS WHOSE PRICES HAVE HIT
NEW LOWS. AT THE SAME TIME, WE TEND TO BE DISCIPLINED IN MAKING SELL DECISIONS.
WE WOULD RATHER SELL EARLY THAN SELL TOO LATE."
36
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID- AND LARGE-
CAP STOCKS
Large companies are usually well-established. Compared to mid-cap companies,
they may be less responsive to change, but their returns have sometimes led
those of mid-cap companies, often with lower volatility.
Mid-cap stocks have historically performed more like small-caps than like large-
caps. Their prices can rise and fall substantially, although they have the
potential to offer attractive long-term returns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for well-managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - strong fundamentals
- - consistent cash flow
- - a sound track record through all phases of the market cycle
The managers may also look for other characteristics in a company, such as a
strong position relative to competitors, a high level of stock ownership among
management, and a recent sharp decline in stock price that appears to be the
result of a short-term market overreaction to negative news.
The fund generally considers selling a stock when it reaches the managers'
target price, when it fails to perform as expected, or when other opportunities
appear more attractive.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Partners Trust 37
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; over time, however, large-cap stocks may perform better or less well
than mid-cap stocks. At any given time, one or both groups of stocks may be out
of favor with investors. If the fund emphasizes either group of stocks, its
performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions. To the extent that the managers sell stocks before they
reach their market peak, the fund may miss out on opportunities for higher
performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
38 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, Neuberger Berman Management has acted as investment adviser to another
Neuberger Berman fund, which is not offered in this prospectus but which invests
in the same portfolio of securities, since 1975; in the chart and table below,
performance results for periods before August 1993 are those of the older fund.
Because the older fund had slightly lower expenses, its performance was slightly
better than your fund would have realized in the same period. This information
is based on past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 15.46%
89 22.78%
90 -5.11%
91 22.36%
92 17.52%
93 15.45%
94 -0.99%
95 35.15%
96 26.45%
97 29.10%
BEST QUARTER: Q2 '97, up 14.03%
WORST QUARTER: Q3 '90, down 9.61%
Year-to-date performance as of 9/30/98: down
8.71%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
PARTNERS TRUST 29.10 20.32 17.17
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Partners Trust 39
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL M. KASSEN, ROBERT I. GENDELMAN AND S. BASU MULLICK are Vice Presidents
of Neuberger Berman Management. Kassen and Gendelman are principals of Neuberger
Berman, LLC. Kassen has been manager of the fund since 1990, and was joined by
Gendelman in 1994 and Mullick in 1998. Gendelman was a portfolio manager at
another firm from 1992 to 1993, as was Mullick from 1993 to 1998.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.85% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.85
PLUS: Distribution (12b-1) fees None
Other expenses 0.06
....
EQUALS: Total annual operating expenses 0.91
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
ITS TOTAL ANNUAL OPERATING EXPENSES ARE NOT MORE THAN 0.10% ABOVE THOSE OF
ANOTHER NEUBERGER BERMAN FUND THAT INVESTS IN THE SAME PORTFOLIO OF
SECURITIES. THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES. UNDER THIS ARRANGEMENT, WHICH
NEUBERGER BERMAN MANAGEMENT CAN TERMINATE UPON SIXTY DAYS' NOTICE TO THE FUND,
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND LAST YEAR WERE LIMITED TO 0.90% OF
THE FUND'S AVERAGE NET ASSETS. ACTUAL EXPENSES THIS YEAR MAY BE HIGHER OR
LOWER.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $93 $290 $504 $1120
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$92, $287, $498 AND $1108, RESPECTIVELY.
40 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.01 10.54 12.68 13.39 18.80
PLUS: Income from investment operations
Net investment income 0.03 0.05 0.08 0.07 0.11
Net gains/losses -- realized and unrealized 0.53 2.19 1.59 6.06 (1.82)
Subtotal: income from investment operations 0.56 2.24 1.67 6.13 (1.71)
MINUS: Distributions to shareholders
Income dividends 0.01 0.02 0.07 0.08 0.08
Capital gain distributions 0.02 0.08 0.89 0.64 1.77
Subtotal: distributions to shareholders 0.03 0.10 0.96 0.72 1.85
...........................................
EQUALS: Share price (NAV) at end of year 10.54 12.68 13.39 18.80 15.24
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.81 0.92 0.94 0.91 0.90
Gross expenses(1) 2.50 1.24 1.06 0.94 0.91
Expenses(2) -- -- 0.94 0.91 0.90
Net investment income -- actual 0.47 0.81 0.84 0.64 0.70
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(3) (%) 5.61 21.52 13.76 47.11 (10.15)
Net assets at end of year (in millions of dollars) 4.7 61.3 128.5 470.6 729.7
Portfolio turnover rate (%) 75 98 96 77 109
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Partners Trust 41
<PAGE>
[PHOTO]
NEUBERGER BERMAN
SOCIALLY RESPONSIVE TRUST
- --------------------------------------------------------------------------------
ABOVE: PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
42
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Socially Responsive Trust 43
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; over time, however, large-cap stocks may perform better or less well
than mid-cap stocks. At any given time, one or both groups of stocks may be out
of favor with investors. If the fund emphasizes either group of stocks, its
performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
44 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since March 1997.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1994; in the chart and table below, performance results for periods before
March 1997 are those of the older fund. Because the older fund had slightly
lower expenses, its performance was slightly better than your fund would have
realized in the same period. This information is based on past performance; it's
not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 38.94%
96 18.50%
97 24.32%
BEST QUARTER: Q2 '97, up 15.63%
WORST QUARTER: Q1 '97, down 1.90%
Year-to-date performance as of 9/30/98: down
4.97%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/16/94
<S> <C> <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE TRUST 24.32 19.63
S&P 500 Index 33.32 24.09
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Socially Responsive Trust 45
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990 and has been manager of the fund since
1994.
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and have been Associate Managers of the fund since 1997. Ladd
has been a portfolio manager at the firm since 1992; Saukaitis was project
director for a social research group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services. For
the 12 months ended 8/31/98, the management/administration fees paid to
Neuberger Berman Management were 0.95% of average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.95
PLUS: Distribution (12b-1) fees None
Other expenses 1.10
....
EQUALS: Total annual operating expenses 2.05
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
ITS TOTAL ANNUAL OPERATING EXPENSES ARE NOT MORE THAN 0.10% ABOVE THOSE OF
ANOTHER NEUBERGER BERMAN FUND THAT INVESTS IN THE SAME PORTFOLIO OF
SECURITIES. THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES. UNDER THIS ARRANGEMENT, WHICH
NEUBERGER BERMAN MANAGEMENT CAN TERMINATE UPON SIXTY DAYS' NOTICE TO THE FUND,
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND LAST YEAR WERE LIMITED TO 1.20% OF
THE FUND'S AVERAGE NET ASSETS. ACTUAL EXPENSES THIS YEAR MAY BE HIGHER OR
LOWER.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $208 $643 $1103 $2379
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$122, $381, $660, AND $1455, RESPECTIVELY.
46 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1997(1) 1998
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund
earned (or lost), what it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.00 11.43
PLUS: Income from investment operations
Net investment income -- 0.03
Net gains/losses -- realized and unrealized 1.43 (0.71)
Subtotal: income from investment operations 1.43 (0.68)
MINUS: Distributions to shareholders
Income dividends -- 0.01
Capital gain distributions -- 0.10
Subtotal: distributions to shareholders -- 0.11
......................................................................
EQUALS: Share price (NAV) at end of year 11.43 10.64
- --------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as
well as how they would have been if certain expense reimbursement and offset arrangements
had not been in effect.
Net expenses -- actual 1.58(2) 1.20
Gross expenses(3) 3.33(2) 2.05
Expenses(4) 1.58(2) 1.20
Net investment income -- actual 0.06(2) 0.33
- --------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year,
assuming all distributions were reinvested. The turnover rate reflects how actively the fund
bought and sold securities.
Total return(6) (%) 14.30(5) (6.05)
Net assets at end of year (in millions of dollars) 7.7 13.4
Portfolio turnover rate (%) 51 47
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 3/3/97 (BEGINNING OF OPERATIONS) TO 8/31/97.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Socially Responsive Trust 47
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the funds and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of any of the funds described in this prospectus, contact
your investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The funds do not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
48 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before a fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
Under certain circumstances, the funds reserve the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
Your Investment 49
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
A fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of a fund's securities
changes every business day, the share price usually changes as well.
When valuing portfolio securities, the funds use market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. A fund may also use these methods to
value certain types of illiquid securities.
Because these funds do not have sales charges, the price you pay for each share
of a fund is the fund's net asset value per share. Similarly, because these
funds charge no fees for selling shares, they pay you the full share price when
you sell shares. Remember that your investment provider may charge fees for its
services.
The funds are open for business every day the New York Stock Exchange is open.
In general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. Each fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by a fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
50 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- Each fund pays out to shareholders any net income and net
capital gains. Ordinarily, the funds make any distributions once a year (in
December), except for Guardian Trust, which typically distributes income every
quarter.
Consult your investment provider about whether your income and capital gains
distributions from a fund will be reinvested in that fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. For an account under a Roth IRA,
distributions may be tax-free. For other individual retirement accounts and
qualified retirement plans, taxes are deferred.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
Your Investment 51
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the funds could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the funds' portfolios will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
52 Neuberger Berman
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
Each of the funds in this prospectus uses a "master-feeder" structure.
Rather than investing directly in securities, each fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus we have used the word "fund" to mean a feeder fund and its
master portfolio. Costs for a feeder fund include its own costs and its share of
master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, a
feeder fund could switch to another master portfolio or decide to manage its
assets itself. No fund in this prospectus is currently contemplating such a
move.
Your Investment 53
<PAGE>
- -------------------------------------------------------------
[PHOTO]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-7784
NBETP0001298
NEUBERGER BERMAN EQUITY TRUSTS
If you'd like further details on any of these funds, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on these funds, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about each fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY TRUST-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 21, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Genesis Trust
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY TRUST
PAGE 2 ...... Genesis Trust
YOUR INVESTMENT
8 ...... Maintaining Your Account
10 ...... Share Prices
11 ...... Distributions and Taxes
13 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than $49
billion in total assets and continue an asset management history that began in
1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAS NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAS NO DISTRIBUTION (12b-1)
FEES
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - ALSO OFFERS THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH A FUND THAT
INVESTS USING A VALUE APPROACH
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU
SELL FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GENESIS TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBGEX ABOVE: PORTFOLIO MANAGERS JUDITH M. VALE AND
ROBERT W. D'ALELIO
"WE SEEK OUT SMALL COMPANIES THAT ARE LITTLE-KNOWN AND OFTEN ARE IN LESS
GLAMOROUS INDUSTRIES. FUTURE GROWTH IS ONE AREA WE FOCUS ON, BUT EQUALLY
IMPORTANT TO US IS EVIDENCE OF SOLID PERFORMANCE AND A PROVEN MANAGEMENT TEAM.
AND AS VALUE INVESTORS, WE LOOK FOR STOCKS THAT ARE SELLING AT ATTRACTIVE
PRICES."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers look for undervalued companies whose current product lines and
balance sheets are strong. Factors in identifying these firms may include:
- - above-average returns
- - an established market niche
- - circumstances that would make it difficult for new competitors to enter the
market
- - the ability to finance their own growth
- - sound future business prospects
This approach is designed to let the fund benefit from potential increases in
stock prices while limiting the risks typically associated with small-cap
stocks.
At times, the managers may emphasize certain industries that they believe will
benefit from market or economic trends.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Genesis Trust 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Stock prices of many smaller companies are based on future expectations. The
portfolio managers tend to focus on companies whose financial strength is
largely based on existing business lines rather than projected growth. While
this can help reduce risk, the fund is still subject to many of the risks of
small-cap investing. These include the risk that the fund's holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of a given sector that the managers
decided to focus on
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. The fund has been in operation since August 1993.
However, another Neuberger Berman fund, which is not offered in this prospectus
but which invests in the same portfolio of securities, has been in operation
since 1988; in the chart and table below, performance results for periods before
August 1993 are those of the older fund. Because the older fund had slightly
lower expenses, its performance was slightly better than your fund would have
realized in the same period. This information is based on past performance; it's
not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89 17.25%
90 -16.24%
91 41.55%
92 15.62%
93 14.37%
94 -1.66%
95 27.17%
96 29.90%
97 34.86%
BEST QUARTER: Q1 '91, up 25.05%
WORST QUARTER: Q3 '90, down 21.81%
Year-to-date performance as of 9/30/98: down
17.19%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years 9/27/88
<S> <C> <C> <C>
- -------------------------------------------------------------------
GENESIS TRUST 34.86 20.17 16.64
Russell 2000 Index 22.36 16.40 14.46
</TABLE>
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
Genesis Trust 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JUDITH M. VALE is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. A senior member of the Small Cap Group since
1992, she has co-managed the fund's assets since 1994.
ROBERT W. D'ALELIO is a Vice President of Neuberger Berman Management. A senior
member of the Small Cap Group since joining the firm in 1996, he has co-managed
the fund's assets since 1997. From 1988 to 1996, he was a senior portfolio
manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 1.09% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 0.08
....
EQUALS: Total annual operating expenses 1.19
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $121 $378 $654 $1443
</TABLE>
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it
distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.05 10.59 12.65 14.99 21.45
PLUS: Income from investment operations
Net investment income (loss) (0.01) (0.01) (0.02) (0.01) 0.12
Net gains/losses -- realized and unrealized 0.56 2.08 2.68 6.61 (4.14)
Subtotal: income from investment operations 0.55 2.07 2.66 6.60 (4.02)
MINUS: Distributions to shareholders
Capital gain distributions 0.01 0.01 0.32 0.14 0.15
Subtotal: distributions to shareholders 0.01 0.01 0.32 0.14 0.15
....................................................
EQUALS: Share price (NAV) at end of year 10.59 12.65 14.99 21.45 17.28
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income (loss) -- as they actually are as well as how they would
have been if certain expense reimbursement/waiver and offset arrangements had not been in effect.
Net expenses -- actual 1.36 1.42 1.38 1.25 1.17
Gross expenses(1) 2.50 1.78 1.65 1.35 1.19
Expenses(2) -- -- 1.38 1.26 1.17
Net investment income (loss) -- actual (0.21) (0.24) (0.27) (0.16) 0.68
- -----------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(3) (%) 5.47 19.51 21.44 44.31 (18.88)
Net assets at end of year (in millions of dollars) 3.1 30.6 65.2 382.7 704.5
Portfolio turnover rate (%) 63 37 21 18 18
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT/WAIVER.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS; THE MANAGEMENT FEE WAIVER IS INCLUDED, HOWEVER. THIS
CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER 9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES AND/OR WAIVED A PORTION OF THE MANAGEMENT FEE.
Genesis Trust 7
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of the fund described in this prospectus, contact your
investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The fund does not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
8 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
Your Investment 9
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
does not charge any fee for selling shares, the fund pays you the full share
price when you sell shares. Remember that your investment provider may charge
fees for its services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. The fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes any distributions once a year in
December.
Consult your investment provider about whether your income and capital gains
distributions from the fund will be reinvested in the fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. For an account under a Roth IRA,
distributions may be tax-free. For other individual retirement accounts and
qualified retirement plans, taxes are deferred.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
Your Investment 11
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
12 Neuberger Berman
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio. Costs for the feeder fund include its own costs and its share
of master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. The fund is not currently contemplating such a move.
Your Investment 13
<PAGE>
- -------------------------------------------------------------
[PHOTO]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-7784
NEUBERGER BERMAN GENESIS TRUST
If you'd like further details about this fund, you can request a free copy of
the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY TRUST-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 21, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Guardian Trust
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY TRUST
PAGE 2 ...... Guardian Trust
YOUR INVESTMENT
8 ...... Maintaining Your Account
10 ...... Share Prices
11 ...... Distributions and Taxes
13 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than $49
billion in total assets and continue an asset management history that began in
1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAS NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAS NO DISTRIBUTION (12b-1)
FEES
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - ALSO OFFERS THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH A FUND THAT
INVESTS USING A VALUE APPROACH
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU
SELL FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GUARDIAN TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: NBGTX ABOVE: PORTFOLIO MANAGERS ALLAN "RICK" WHITE
AND KEVIN L. RISEN
"WITH GUARDIAN TRUST WE LOOK FOR ESTABLISHED COMPANIES THAT ARE EITHER 'UNDER A
ROCK' OR 'UNDER A CLOUD' -- MEANING THAT THEY'RE EITHER NOT WELL FOLLOWED ON
WALL STREET OR THEY'RE TEMPORARILY OUT OF FAVOR WITH OTHER INVESTORS. IT'S VERY
MUCH A CONTINUATION OF THE CLASSIC VALUE APPROACH THE FUND HAS USED SINCE ITS
FOUNDING IN 1950."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
LARGE-CAP STOCKS
Large companies are usually well-established. They may have a variety of
products and business lines and a sound financial base that can help them
weather bad times.
Compared to smaller companies, large companies can be less responsive to changes
and opportunities. At the same time, their returns have sometimes led those of
smaller companies, often with lower volatility.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A
SECONDARY GOAL.
To pursue these goals, the fund invests mainly in common stocks of
large-capitalization companies. The fund seeks to reduce risk by diversifying
among a large number of companies across many different industries and economic
sectors, and by managing its overall exposure to a wide variety of risk factors.
The managers look for well-managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - solid balance sheets
- - above-average returns
- - low price-to-earnings ratios
- - consistent earnings
Because the managers tend to find that undervalued stocks may be more common in
certain sectors of the economy at a given time, the fund may emphasize those
sectors.
The fund has paid an income dividend every quarter, and a capital gain
distribution every year, since December 1993, the year of the fund's inception.
Of course, it cannot guarantee that it will continue to do so.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Guardian Trust 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
At times, large-cap stocks may lag other types of stocks in performance, which
could cause the fund to perform less well than certain other funds. While they
may at times be less risky than small-cap stocks, large-cap stocks may perform
better or less well over time.
To the extent that a value approach dictates an emphasis on certain sectors of
the market at any given time, the fund's performance is likely to be
disproportionately affected by the economic, market, and other developments that
may influence those sectors. The fund's performance may also suffer if a sector
does not perform as the portfolio managers expected.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW]
The bar chart below shows how performance has varied from year to
year. The table below the chart shows what the returns would equal if
you averaged out actual performance over various lengths of time. The fund has
been in operation since August 1993. However, another Neuberger Berman fund,
which is not offered in this prospectus but which invests in the same portfolio
of securities, has been in operation since 1950; in the chart and table below,
performance results for periods before August 1993 are those of the older fund.
Because the older fund had slightly lower expenses, its performance was slightly
better than your fund would have realized in the same period. This information
is based on past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 28.05%
89 21.50%
90 -4.71%
91 34.33%
92 19.01%
93 13.52%
94 1.52%
95 31.99%
96 17.74%
97 17.83%
BEST QUARTER: Q1 '91, up 17.42%
WORST QUARTER: Q3 '90, down 15.76%
Year-to-date performance as of 9/30/98: down
16.88%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GUARDIAN TRUST 17.83 16.11 17.46
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Guardian Trust 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
KEVIN L. RISEN is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has co-managed the fund's assets since
1996. He joined Neuberger Berman in 1992 as an analyst, and has been a portfolio
manager since 1995.
ALLAN R. WHITE III is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since September 1998, when he joined the firm. From
1989 to 1998 he was a portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.84% of
average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.84
PLUS: Distribution (12b-1) fees None
Other expenses 0.03
....
EQUALS: Total annual operating expenses 0.87
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $89 $278 $482 $1073
</TABLE>
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it
distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.27 11.27 13.83 14.24 19.47
PLUS: Income from investment operations
Net investment income 0.09 0.13 0.16 0.08 0.09
Net gains/losses -- realized and unrealized 0.99 2.55 0.55 5.48 (3.93)
Subtotal: income from investment operations 1.08 2.68 0.71 5.56 (3.84)
MINUS: Distributions to shareholders
Income dividends 0.07 0.12 0.14 0.10 0.10
Capital gain distributions 0.01 -- 0.16 0.23 1.29
Subtotal: distributions to shareholders 0.08 0.12 0.30 0.33 1.39
.......................................................
EQUALS: Share price (NAV) at end of year 11.27 13.83 14.24 19.47 14.24
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they would have been
if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.80 0.90 0.92 0.88 0.87
Gross expenses(1) 1.52 0.96 0.92 -- --
Expenses(2) -- -- 0.92 0.88 0.87
Net investment income -- actual 1.50 1.35 1.26 0.47 0.50
- --------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 10.57(3) 24.01(3) 5.19(3) 39.56 (20.88)
Net assets at end of year (in millions of dollars) 75.8 683.1 1,340.1 2,269.8 1,529.5
Portfolio turnover rate (%) 24 26 37 50 60
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER
BERMAN MANAGEMENT HAD NOT
REIMBURSED CERTAIN EXPENSES.
Guardian Trust 7
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of the fund described in this prospectus, contact your
investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The fund does not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
8 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
Your Investment 9
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
does not charge any fee for selling shares, the fund pays you the full share
price when you sell shares. Remember that your investment provider may charge
fees for its services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. The fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund distributes income every quarter.
Consult your investment provider about whether your income and capital gains
distributions from the fund will be reinvested in the fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. For an account under a Roth IRA,
distributions may be tax-free. For other individual retirement accounts and
qualified retirement plans, taxes are deferred.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
Your Investment 11
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
12 Neuberger Berman
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio. Costs for the feeder fund include its own costs and its share
of master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. The fund is not currently contemplating such a move.
Your Investment 13
<PAGE>
- -------------------------------------------------------------
[PHOTO]
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from your
investment provider, or from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-7784
NBEGT0001298
NEUBERGER BERMAN GUARDIAN TRUST
If you'd like further details about this fund, you can request a free copy of
the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY TRUST-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 21, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
NYCDC Socially
Responsive Trust
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY TRUST
PAGE 2 ...... NYCDC Socially Responsive Trust
YOUR INVESTMENT
8 ...... Maintaining Your Account
10 ...... Share Prices
11 ...... Distributions and Taxes
13 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than $49
billion in total assets and continue an asset management history that began in
1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAS NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAS NO DISTRIBUTION (12b-1)
FEES
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU
SELL FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
NYCDC SOCIALLY RESPONSIVE TRUST
- --------------------------------------------------------------------------------
ABOVE: PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value-investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
NYCDC Socially Responsive Trust 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; over time, however, large-cap stocks may perform better or less well
than mid-cap stocks. At any given time, one or both groups of stocks may be out
of favor with investors. If the fund emphasizes either group of stocks, its
performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ARROW] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 40.36%
96 19.60%
97 25.45%
BEST QUARTER: Q2 '97, up 15.89%
WORST QUARTER: Q1 '97, down 1.69%
Year-to-date performance as of 9/30/98: down
4.56%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/14/94
<S> <C> <C>
- --------------------------------------------------------------
NYCDC SOCIALLY RESPONSIVE TRUST 25.45 21.02
S&P 500 Index 33.32 24.24
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
NYCDC Socially Responsive Trust 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990 and has been manager of the fund since
1994.
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and have been Associate Managers of the fund since 1997. Ladd
has been a portfolio manager at the firm since 1992; Saukaitis was project
director for a social research group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services. For
the 12 months ended 8/31/98, the management/administration fees paid to
Neuberger Berman Management were 0.60% of average net assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.60
PLUS: Distribution (12b-1) fees --
Other expenses 0.10
....
EQUALS: Total annual operating expenses 0.70
</TABLE>
* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 0.60% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT CAN BE TERMINATED UPON SIXTY DAYS' NOTICE
TO THE FUND. IN ADDITION, THE ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $72 $224 $390 $ 871
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$61, $192, $335, AND $750, RESPECTIVELY.
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994(1) 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it distributed
to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.20 10.43 12.27 14.42 17.62
PLUS: Income from investment operations
Net investment income 0.06 0.13 0.14 0.17 0.17
Net gains/losses -- realized and unrealized 0.17 1.82 2.44 4.38 (1.06)
Subtotal: income from investment operations 0.23 1.95 2.58 4.55 (0.89)
MINUS: Distributions to shareholders
Income dividends -- 0.11 0.12 0.16 0.16
Capital gain distributions -- -- 0.31 1.19 0.80
Subtotal: distributions to shareholders -- 0.11 0.43 1.35 0.96
..........................................................
EQUALS: Share price (NAV) at end of year 10.43 12.27 14.42 17.62 15.77
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they would have been if
certain expense reimbursement/repayment and offset arrangements had not been in effect.
Net expenses -- actual 0.60(2) 0.60 0.60 0.60 0.60
Gross expenses(3) 0.84(2) 0.85 0.80 0.73 0.70
Expenses(4) -- -- 0.60 0.60 0.60
Net investment income -- actual 1.42(2) 1.26 1.06 1.11 0.92
- -----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each period, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return(6) (%) 2.26(5) 18.95 21.27 33.20 (5.49)
Net assets at end of year (in millions of dollars) 68.6 88.5 125.6 188.9 186.7
Portfolio turnover rate (%) 14 58 53 51 47
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 3/14/94 (BEGINNING OF OPERATIONS) TO 8/31/94.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT/REPAYMENT.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
NYCDC Socially Responsive Trust 7
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through the Deferred
Compensation Plan of the City of New York and Related Agencies and
Instrumentalities.
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from the Plan. This includes information on
how to buy and sell shares, investor services, and additional policies.
In exchange for the services it offers, the Plan may charge fees, which are
generally in addition to those described in this prospectus.
The Fund was created as an investment vehicle for participants in the Deferred
Compensation Plan of the City of New York and Related Agencies and
Instrumentalities who are seeking to invest their money in a manner consistent
with their social sensibilities.
You can buy, own, and sell fund shares only through the Plan.
All investments by the Plan must be made in U.S. dollars, and investment checks
must be drawn on a U.S. bank. The fund does not issue certificates for shares.
8 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from shares sold will be paid to the Plan in the manner and at the
times agreed with Neuberger Berman Management, but in any case within three
business days. In unusual circumstances proceeds may be delayed beyond this time
where the law allows additional time if needed. The Plan may not follow the same
procedures for payment of proceeds to you from the shares you sold.
Your Investment 9
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
does not charge any fee for selling shares, the fund pays you the full share
price when you sell shares. Remember that the Plan may charge fees for its
services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted by the Trustee of the
Plan, as set forth in the Plan document; check with the Plan to find out by what
time your order must be received in order to be processed the same day. The fund
calculates its share price as of the end of regular trading on business days,
usually 4:00 p.m. eastern time. Depending on when the Plan accepts orders, it's
possible that the fund's share price could change on days when you are unable to
buy or sell shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
DISTRIBUTIONS -- The fund pays out to the Plan any net income and net capital
gains. Ordinarily, the fund makes any distributions once a year in December.
The amount of the distribution is reinvested in additional fund shares unless
the Plan elects to receive them in cash.
Because the Plan is an eligible deferred compensation plan, taxes on
distributions from the fund to the Plan are deferred. Consult the Plan documents
and your tax professional for information on the tax consequences associated
with participating in an investment in the fund through the Plan. Everyone's tax
situation is different, and your professional should be able to help you answer
any questions you may have.
Your Investment 11
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio. Costs for the feeder fund include its own costs and its share
of master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. The fund is not currently contemplating such a move.
12
<PAGE>
- -------------------------------------------------------------
[PHOTO]
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from your
investment provider, or from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
Web site:
www.nbfunds.com
Email:
[email protected]
DEFERRED COMPENSATION PLAN OF THE CITY OF NEW YORK AND RELATED AGENCIES AND
INSTRUMENTALITIES
40 Rector Street, 3rd Floor
New York, NY 10006
(212) 306-7760
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-7784
NBEP00061298
NEUBERGER BERMAN NYCDC SOCIALLY RESPONSIVE TRUST
If you'd like further details about this fund, you can request a free copy of
the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager about strategies and market conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER BERMAN EQUITY TRUSTS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER___, 1998
Neuberger Berman Neuberger Berman
MANHATTAN Trust GENESIS Trust
(and Neuberger Berman (and Neuberger Berman
Manhattan Portfolio) Genesis Portfolio)
Neuberger Berman Neuberger Berman
FOCUS Trust GUARDIAN Trust
(and Neuberger Berman (and Neuberger Berman
Focus Portfolio) Guardian Portfolio)
Neuberger Berman Neuberger Berman
PARTNERS Trust SOCIALLY RESPONSIVE Trust
(and Neuberger Berman (and Neuberger Berman
Partners Portfolio) Socially Responsive Portfolio)
Neuberger Berman Neuberger Berman
MILLENNIUM Trust INTERNATIONAL Trust
(and Neuberger Berman (and Neuberger Berman
Millennium Portfolio) International Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger Berman MANHATTAN Trust, Neuberger Berman GENESIS Trust,
Neuberger Berman FOCUS Trust, Neuberger Berman GUARDIAN Trust, and Neuberger
Berman PARTNERS Trust, Neuberger Berman MILLENNIUM Trust, Neuberger Berman
SOCIALLY RESPONSIVE Trust, and Neuberger Berman INTERNATIONAL Trust (each a
"Fund") are no-load mutual funds that offer shares pursuant to a Prospectus
dated December ____, 1998. The Funds invest all of their net investable assets
in Neuberger Berman MANHATTAN Portfolio, Neuberger Berman GENESIS Portfolio,
Neuberger Berman FOCUS Portfolio, Neuberger Berman GUARDIAN Portfolio, Neuberger
Berman PARTNERS Portfolio, Neuberger Berman MILLENNIUM Portfolio, Neuberger
Berman SOCIALLY RESPONSIVE Portfolio and Neuberger Berman INTERNATIONAL
Portfolio (each a "Portfolio"), respectively.
<PAGE>
An investor can buy, own, and sell Fund shares ONLY through an account
with an administrator, broker-dealer, or other institution that provides
accounting, recordkeeping, and other services to investors and that has an
administrative services agreement with Neuberger Berman Management Incorporated
(each an "Institution").
The Funds' Prospectus provides basic information that an investor should
know before investing. A copy of the Prospectus may be obtained, without charge,
from Neuberger Berman Management Incorporated ("NB Management"), Institutional
Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or by calling
800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
2
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................5
Neuberger Berman MANHATTANPortfolio..............................5
Neuberger Berman GENESISPortfolio................................6
Neuberger Berman FOCUSPortfolio..................................8
Neuberger Berman GUARDIANPortfolio...............................9
Neuberger Berman PARTNERSPortfolio...............................9
Neuberger Berman SOCIALLY RESPONSIVEPortfolio...................10
Neuberger Berman INTERNATIONALPortfolio.........................12
Neuberger Berman MILLENNIUMPortfolio............................17
Additional Investment Information...............................17
Neuberger Berman FOCUSPortfolio - Description of Economic Sectors.....38
Neuberger Berman SOCIALLY RESPONSIVEPortfolio - Description of
Social Policy...................................................40
PERFORMANCE INFORMATION.....................................................43
Total Return Computations.............................................43
Comparative Information...............................................44
Other Performance Information.........................................45
CERTAIN RISK CONSIDERATIONS.................................................46
TRUSTEES AND OFFICERS.......................................................46
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................53
Investment Manager and Administrator..................................53
Management and Administration Fees....................................55
Sub-Adviser...........................................................57
Investment Companies Managed..........................................58
Management and Control of NB Management...............................61
DISTRIBUTION ARRANGEMENTS...................................................62
ADDITIONAL PURCHASE INFORMATION.............................................62
Share Prices and Net Asset Value......................................62
i
<PAGE>
ADDITIONAL EXCHANGE INFORMATION.............................................63
ADDITIONAL REDEMPTION INFORMATION...........................................64
Suspension of Redemptions.............................................64
Redemptions in Kind...................................................64
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................64
ADDITIONAL TAX INFORMATION..................................................65
Taxation of the Funds.................................................65
Taxation of the Portfolios............................................66
Taxation of the Funds' Shareholders...................................69
PORTFOLIO TRANSACTIONS......................................................69
Portfolio Turnover....................................................75
REPORTS TO SHAREHOLDERS.....................................................75
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................76
CUSTODIAN AND TRANSFER AGENT................................................78
INDEPENDENT AUDITORS/ACCOUNTANTS............................................79
LEGAL COUNSEL...............................................................79
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................79
REGISTRATION STATEMENT......................................................83
FINANCIAL STATEMENTS........................................................83
Appendix A...................................................................1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER........................1
ii
<PAGE>
INVESTMENT INFORMATION
Each Fund (except Neuberger Berman SOCIALLY RESPONSIVE Trust) is a
separate operating series of Neuberger Berman Equity Trust ("Equity Trust"), a
Delaware business trust that is registered with the Securities and Exchange
Commission ("SEC") as a diversified open-end management investment company.
Neuberger Berman SOCIALLY RESPONSIVE Trust is a separate operating series of
Neuberger Berman Equity Assets ("Equity Assets"), a Delaware business trust that
is registered with the SEC as an open-end management investment company.
Neuberger Berman Equity Trust and Neuberger Berman Equity Assets are referred to
below as the "Trusts." Each Fund seeks its investment objective by investing all
of its net investable assets in a Portfolio of Equity Managers Trust or, in the
case of Neuberger Berman International Trust, in a Portfolio of Global Managers
Trust that has an investment objective identical to, and a name similar to, that
of the Fund. Each Portfolio, in turn, invests in securities in accordance with
an investment objective, policies, and limitations identical to those of its
corresponding Fund. Equity Managers Trust and Global Managers Trust ("Managers
Trusts") are open-end management investment companies managed by NB Management.
The following information supplements the discussion in the Prospectus of
the investment objective, policies, and limitations of each Fund and Portfolio.
The investment objective and, unless otherwise specified, the investment
policies and limitations of each Fund and Portfolio are not fundamental. Any
investment objective, policy or limitation that is not fundamental may be
changed by the trustees of the respective Trust ("Fund Trustees") or of the
corresponding Managers Trust ("Portfolio Trustees") without shareholder
approval. The fundamental investment policies and limitations of a Fund or a
Portfolio may not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the Fund
or Portfolio represented at a meeting at which more than 50% of the outstanding
Fund or Portfolio shares are represented, or
(2) a majority of the outstanding shares of the Fund or Portfolio.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever a Fund is called upon to vote on a change in a fundamental investment
policy or limitation of its corresponding Portfolio, the Fund casts its votes in
proportion to the votes of its shareholders at a meeting thereof called for that
purpose.
INVESTMENT POLICIES AND LIMITATIONS
Each Fund (except Neuberger Berman SOCIALLY RESPONSIVE Trust, Neuberger
Berman MILLENNIUM Trust, and Neuberger Berman INTERNATIONAL Trust) has the
following fundamental investment policy, to enable it to invest in its
corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
1
<PAGE>
Neuberger Berman SOCIALLY RESPONSIVE Trust and Neuberger Berman MILLENNIUM
Trust have the following fundamental investment policy, to enable each to invest
in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its net investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
Neuberger Berman INTERNATIONAL Trust has the following fundamental
investment policy, to enable it to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its net investable assets in an open-end management
investment company having substantially the same investment objective,
policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The following investment policies and limitations are fundamental and
apply to all Portfolios unless otherwise indicated:
1. BORROWING (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). No Portfolio may borrow money, except that a Portfolio may (i)
borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (ii) enter into reverse repurchase agreements for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, that Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.
BORROWING (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio may
not borrow money, except that the Portfolio may (i) borrow money from banks for
temporary or emergency purposes and for leveraging or investment and (ii) enter
into reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 33-1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of the Portfolio's total assets, the
Portfolio will reduce its borrowings within three days (excluding Sundays and
holidays) to the extent necessary to comply with the 33-1/3% limitation.
2
<PAGE>
2. COMMODITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). No Portfolio may purchase physical commodities or contracts thereon,
unless acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit a Portfolio from purchasing futures
contracts or options (including options on futures contracts, but excluding
options or futures contracts on physical commodities) or from investing in
securities of any kind.
COMMODITIES (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio may
not purchase physical commodities or contracts thereon, unless acquired as a
result of the ownership of securities or instruments, but this restriction shall
not prohibit the Portfolio from purchasing futures contracts, options (including
options on futures contracts, but excluding options or futures contracts on
physical commodities), foreign currencies or forward contracts, or from
investing in securities of any kind.
3. DIVERSIFICATION. No Portfolio may, with respect to 75% of the value
of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. No Portfolio may purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
5. LENDING. No Portfolio may lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). No Portfolio may purchase real estate unless acquired as a result of
the ownership of securities or instruments, but this restriction shall not
prohibit a Portfolio from purchasing securities issued by entities or investment
vehicles that own or deal in real estate or interests therein or instruments
secured by real estate or interests therein.
REAL ESTATE (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). This Portfolio may
not invest any part of its total assets in real estate or interests in real
estate unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing readily marketable securities issued by entities or investment
vehicles that own or deal in real estate or interests therein or instruments
secured by real estate or interests therein.
7. SENIOR SECURITIES. No Portfolio may issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. No Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
3
<PAGE>
For purposes of the limitation on commodities, the Portfolios do not
consider foreign currencies or forward contracts to be physical commodities.
The following investment policies and limitations are non-fundamental and
apply to all Portfolios unless otherwise indicated:
1. BORROWING (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). None of these Portfolios may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Portfolio may make any loans other than securities
loans.
3. MARGIN TRANSACTIONS. No Portfolio may purchase securities on margin
from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
INTERNATIONAL AND NEUBERGER BERMAN MILLENNIUM PORTFOLIOS). None of these
Portfolios may invest more than 10% of the value of its total assets in
securities of foreign issuers, provided that this limitation shall not apply to
foreign securities denominated in U.S. dollars, including American Depositary
Receipts ("ADRs").
5. ILLIQUID SECURITIES. No Portfolio may purchase any security if, as a
result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
6. PLEDGING (NEUBERGER BERMAN GENESIS AND NEUBERGER BERMAN GUARDIAN
PORTFOLIOS). Neither of these Portfolios may pledge or hypothecate any of its
assets, except that (i) Neuberger Berman GENESIS Portfolio may pledge or
hypothecate up to 15% of its total assets to collateralize a borrowing permitted
under fundamental policy 1 above or a letter of credit issued for a purpose set
forth in that policy and (ii) each Portfolio may pledge or hypothecate up to 5%
of its total assets in connection with its entry into any agreement or
arrangement pursuant to which a bank furnishes a letter of credit to
collateralize a capital commitment made by the Portfolio to a mutual insurance
company of which the Portfolio is a member. The other Portfolios are not subject
to any restrictions on their ability to pledge or hypothecate assets and may do
so in connection with permitted borrowings.
7. SECTOR CONCENTRATION (NEUBERGER BERMAN FOCUS PORTFOLIO). This
Portfolio may not invest more than 50% of its total assets in any one
economic sector.
8. INVESTMENTS IN ANY ONE ISSUER (NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). At the Close of each quarter of this Portfolio's taxable year, (i)
no more than 25% of its total assets may be invested in the securities of a
single issuer, and (ii) with regard to 50% of its total assets, no more than 5%
of its total assets may be invested in the securities of a single issuer. These
4
<PAGE>
limitations do not apply to U.S. Government securities, as defined for tax
purposes, or securities of another regulated investment company ("RIC").
Neuberger Berman MANHATTAN, PARTNERS, and GENESIS Portfolios do not intend
to invest in futures contracts and options thereon during the coming year. In
addition, although the Portfolios do not have policies limiting their investment
in warrants, no Portfolio currently intends to invest in warrants unless
acquired in units or attached to securities.
Temporary Defensive Position. For temporary defensive purposes, each
Portfolio (except Neuberger Berman SOCIALLY RESPONSIVE Portfolio and Neuberger
Berman INTERNATIONAL Portfolio) may invest up to 100% of its total assets in
cash and cash equivalents, U.S. Government and Agency Securities, commercial
paper and certain other money market instruments, as well as repurchase
agreements collateralized by the foregoing.
Any part of Neuberger Berman SOCIALLY RESPONSIVE Portfolio's assets may be
retained temporarily in investment grade fixed income securities of
non-governmental issuers, U.S. Government and Agency Securities, repurchase
agreements, money market instruments, commercial paper, and cash and cash
equivalents when NB Management believes that significant adverse market,
economic political, or other circumstances require prompt action to avoid
losses. In addition, the feeder funds that invest in Neuberger Berman SOCIALLY
RESPONSIVE Portfolio deal with large institutional investors, and the Portfolio
may hold such instruments pending investment or payout when the Portfolio has
received a large influx of cash due to sales of Neuberger Berman SOCIALLY
RESPONSIVE Trust shares, or shares of another fund which invests in the
Portfolio, or when it anticipates a substantial redemption. Generally, the
foregoing temporary investments for Neuberger Berman SOCIALLY RESPONSIVE
Portfolio are selected with a concern for the social impact of each investment.
For temporary defensive purposes, Neuberger Berman INTERNATIONAL Portfolio
may invest up to 100% of its total assets in short-term foreign and U.S.
investments, such as cash or cash equivalents, commercial paper, short-term bank
obligations, government and agency securities, and repurchase agreements.
Neuberger Berman INTERNATIONAL Portfolio may also invest in such instruments to
increase liquidity or to provide collateral to be held in segregated accounts.
INVESTMENT INSIGHT
NEUBERGER BERMAN MANHATTAN PORTFOLIO
The portfolio co-managers of Neuberger Berman MANHATTAN Portfolio love
surprises - positive earnings surprises that is. Their extensive research has
revealed that historically the stocks of companies that consistently exceeded
consensus earnings estimates tended to be terrific performers. They screen the
mid-cap growth stock universe to isolate stocks whose most recent earnings have
beat the Street's expectations. They then roll up their sleeves and, through
diligent fundamental research, strive to identify those companies most likely to
record a string of positive earnings surprises. Their goal is to invest today in
the fast growing mid-sized companies that will comprise tomorrow's Fortune 500.
5
<PAGE>
The co-managers explain, "Let us begin by saying we are growth stock
investors in the purest sense of the term. We want to own the stocks of
companies that are growing earnings faster than the average American business
and ideally, faster than the competitors in their respective industries." The
co-managers explain that they are particularly biased towards companies that
have consistently beaten consensus earnings estimates. Their extensive research
has revealed that stocks whose earnings consistently exceeded expectations
offered greater potential for long-term capital appreciation.
The co-managers focus their research efforts on mid-cap stocks in new
and/or rapidly evolving industries. However, the Portfolio can invest in
securities of companies of any capitalization level. The mid-cap growth sector
is less widely followed by Wall Street analysts and therefore, less efficient
than the large-cap stock market. Considering the currently high valuations of
large-cap growth stocks relative to mid-cap growth stocks with what the
co-managers think is comparable or, in many cases, better earnings growth
potential, they believe the Portfolio is particularly well positioned in today's
market.
The Portfolio now uses the Russell MidcapTM Growth Index as its benchmark.
Consistent with the Portfolio's capitalization parameters and growth style, the
co-managers believe this is a more appropriate benchmark than the S&P "500." The
Portfolio regards mid-cap companies to be those companies with market
capitalizations that, at the time of investment, fall within the capitalization
range of the Russell MidcapTM Index as last announced by the Frank Russell
Company before the date of this SAI. For purposes of this SAI, that range was
approximately $1.4 billion to $10.3 billion. Companies whose market
capitalizations move out of this mid-cap range after purchase continue to be
considered mid-cap companies for purposes of the Portfolio's investment program.
The Portfolio does not follow a policy of active trading for short-term profits.
They reiterate, "Let us once again emphasize we are growth stock
investors. But, there is a value component to our discipline as well. We just
define value differently." The kind of fast growth companies the co-managers
favor generally do not trade at below market average price/earnings ratios.
However, they often trade at very reasonable multiples relative to annual
earnings growth rates. Given the choice between two good companies with
comparable earnings growth rates, the co-managers will select the one trading at
the lower multiple to earnings growth.
"We are dispassionate sellers," say the co-managers. "If a stock does not
live up to our earnings expectations or if we believe its valuation has become
excessive, we will sell and direct the assets to another opportunity we find
more attractive. We will maintain a broadly diversified portfolio rather than
heavily concentrating our holdings in just a few of the fastest growing industry
groups."
NEUBERGER BERMAN GENESIS PORTFOLIO
Neuberger Berman GENESIS Fund (which, like Neuberger Berman GENESIS Trust,
invests all of its net investable assets in Neuberger Berman GENESIS Portfolio)
was established in 1988. A fund dedicated primarily to small-capitalization
stocks (companies with total market value of outstanding common stock of up to
$1.5 billion at the time the Portfolio invests), Neuberger Berman GENESIS
Portfolio is devoted to the same value principles as most of the other equity
funds managed by NB Management. The Portfolio is comprised of small-cap stocks
with solid earnings today, not just promises for tomorrow.
6
<PAGE>
Many people think that small-capitalization stock funds are predominantly
invested in high-risk companies. That is not necessarily the case. Neuberger
Berman GENESIS Portfolio looks for the same fundamentals in small-capitalization
stocks as other Portfolios look for in stocks of larger companies. The portfolio
co-managers stick to the areas they understand. They look for the most
persistent earnings growth at the lowest multiple, as well as for
well-established companies with entrepreneurial management and sound finances.
Also considered are catalysts to exposing value, such as management changes and
new product lines. Often, these are firms that have suffered temporary setbacks
or undergone a restructuring.
Neuberger Berman GENESIS Portfolio's motto is "boring is beautiful."
Instead of investing in trendy, high-priced stocks that tend to hurt
shareholders on the downside, the Portfolio looks for little-known, solid,
growing companies whose stocks the managers believe are wonderful bargains.
AN INTERVIEW WITH THE PORTFOLIO CO-MANAGER
Q: If I already own a large-cap stock fund, why should I consider
investing in a small-cap fund as well?
A: Look at how fast a sapling grows compared to, say, a mature tree.
Much of the same can be true about companies. It's possible for a smaller
company to grow 50% faster than an IBM or a Coca-Cola.
So, many small-cap stocks offer superior growth potential. Consider the
cereal you eat, the detergent you use, the coffee you drink -- and imagine if
you had invested in these products BEFORE they became household names. If you
had invested only in the blue-chip companies of the day, you would have missed
out on these opportunities.
Of course, we're not advocating that an investor's portfolio consist only
of small-cap stock funds. It pays to diversify. Let's look back about 25 years.
While past performance cannot indicate future performance, small-cap stocks
outperformed larger-cap stocks 15 of the years from 1973 to 1997, which means
larger-cap stocks did better the rest of the time.1/
Q: Neuberger Berman GENESIS Trust is classified as a "small-cap value
fund." To many people, "small-cap value" is an oxymoron. Can you clarify the
Portfolio's investment approach?
- ---------------------
1/ Results are on a total return basis and include reinvestment of all dividends
and other distributions. Small-cap stocks are represented by the fifth
capitalization quintile of stocks on the NYSE from 1973 to 1981 and performance
of the Dimensional Fund Advisors (DFA) Small Company Fund from 1982 to 1997.
Larger-cap stocks are represented by the S&P "500" Index, an unmanaged group of
stocks. Please note that indices do not take into account any fees or expenses
of investing in the individual securities that they track. Data about these
indices are prepared or obtained by NB Management. The Portfolio may invest in
many securities not included in the above-described indices. Source: STOCKS,
BONDS, BILLS AND INFLATION 1997 YEARBOOKTM, Ibbotson Associates, Chicago
(annually updates work by Roger G. Ibbotson and Rex A. Sinquefield). Used with
permission. All rights reserved.
7
<PAGE>
A: We understand the confusion. After all, a lot of people equate
"small-cap" with "growth." They also equate "value" with "cheap." At Neuberger
Berman GENESIS Portfolio, we're 100% behind finding GROWING small-cap companies
- -- what we believe are highly profitable companies with solid records and
promising futures. So where do we part company with managers who follow a
"MILLENNIUM" style? It comes down to how much growth and at what price.
MILLENNIUM investors seem willing to pay a premium for vastly superior growth.
This results in two problems: a) growth tends to be discounted by the premium
valuations, and b) the growth expectations are so high as to be unsustainable.
We believe superior yet more stable returns can be purchased at significant
discounts. They may be found in mundane, perhaps even boring, industries.
Remember, the same glamorous appeal that attracts so many growth investors also
attracts competitors.
In that respect, we're "value" managers. Yet we'd like to make this point
clear: Low price-to-earnings multiples, in and of themselves, cannot justify a
"buy" decision. When we search for growing, high-quality small-cap companies
selling at what we feel are bargain prices, we ask ourselves: Is the company
cheap for a good reason? Or, does it have the financial muscle and the
management talent to make it into the big leagues?
Q: Let's turn to specifics. What criteria are used to decide which
small-cap companies make the cut -- and which ones don't?
A: Over the years, we've seen hundreds of small-cap companies that
flourished and just as many that failed to deliver on their early promises. What
made the difference? While every case is unique, here are a few important traits
of the winners.
First of all, a successful small-cap company normally produces high
returns. In practice, this means the business has a number of barriers to entry.
Perhaps the company has a technology that's hard to duplicate. Or maybe it can
make a product at a substantially lower cost than anyone else. Unlike most
businesses, it has an advantage that allows it to continue earning above-market
returns.
In addition to having a competitive edge, a successful small-cap company
should generate healthy cash flow. With excess cash, a company has the ability
to finance its own growth without diluting the ownership stake of existing
stockholders by issuing more shares.
No small-cap company can grow without having the right people on board.
That's why we spend so much time meeting the CEOs and CFOs of small-cap
companies. While we question the managers about future plans and strategies, we
spend as much time evaluating them as people. Do they seem honest and capable?
Or do they puff up their case? Making portfolio decisions is a lot about making
character judgments -- who has the stuff to manage a growing company, and who
doesn't.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS
PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE
PROSPECTUS.
NEUBERGER BERMAN FOCUS PORTFOLIO
Neuberger Berman FOCUS Portfolio's investment objective is long-term
capital appreciation. Like the other Portfolios that use a value-oriented
investment approach, it seeks to buy undervalued securities that offer
opportunities for growth, but then it focuses its assets in those sectors where
8
<PAGE>
undervalued stocks are clustered. The portfolio manager begins by looking for
stocks that are selling for less than the manager thinks they're worth, a
"bottom-up approach." More often than not, such stocks are in a few economic
sectors that are out of favor and are undervalued as a group. The portfolio
manager thinks most cheap stocks deserve to be cheap and their job is to find
the few that don't.
The portfolio manager doesn't pick sectors for Neuberger Berman FOCUS
Portfolio based on his perception of what the economy is going to do. He looks
for stocks with low valuations; often, these stocks will be found in a
particular sector. If an investment manager rotates the sectors in a portfolio
by buying sectors when they are undervalued and selling them when they become
fully valued, the manager may be able to achieve above-average performance. When
a particular industry may fall within more than one sector, NB Management uses
its judgment and experience to determine the placement of that industry within a
sector.
NEUBERGER BERMAN GUARDIAN PORTFOLIO
Neuberger Berman GUARDIAN Portfolio subscribes to the same stock-picking
philosophy followed since Roy R. Neuberger founded Neuberger Berman GUARDIAN
Fund (which, like Neuberger & Berman Guardian Trust, invests all of its net
investable assets in Neuberger & Berman Guardian Portfolio) in 1950.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
test of management is its ability to make money even when the market is flat or
declining. By that measure, Neuberger Berman GUARDIAN Fund has served
shareholders well and has paid a dividend every quarter and a capital gain
distribution EVERY YEAR since 1950; Neuberger Berman GUARDIAN Trust has done so
since December 1993. Of course, there can be no assurance that this trend will
continue.
The portfolio co-managers place a high premium on being knowledgeable
about the companies whose stocks they buy. That knowledge is important, because
sometimes it takes courage to buy stocks that the rest of the market has
forsaken. The managers would rather buy an undervalued stock because they expect
it to become fairly valued than buy one fairly valued and hope it becomes
overvalued. The managers tend to buy stocks that are out of favor, believing
that an investor is not going to get great companies at great valuations when
the market perception is great.
Investors who switch around a lot are not going to benefit from Neuberger
Berman GUARDIAN Portfolio's approach. They're following the market -- this
Portfolio is looking at fundamentals.
NEUBERGER BERMAN PARTNERS PORTFOLIO
Neuberger Berman PARTNERS Portfolio's objective is capital growth. It
seeks to make money in good markets and not give up those gains during rough
times.
Investors in Neuberger Berman PARTNERS Trust typically seek consistent
performance and have a moderate risk tolerance. They do know, however, that
stock investments can provide the long-term upside potential essential to
9
<PAGE>
meeting their long-term investment goals, particularly a comfortable retirement
and planning for a college education.
The portfolio co-managers look for stocks that are undervalued in the
marketplace either in relation to strong current fundamentals, such as a low
price-to-earnings ratio, consistent cash flow, and support from asset values, or
in relation to their projection of the growth of the company's future earnings.
If the market goes down, those stocks the Portfolio elects to hold,
historically, have gone down less.
The portfolio co-managers monitor stocks of medium- to large-sized
companies that often are not closely scrutinized by other investors. The
managers research these companies in order to determine if they are likely to
produce a new product, become an acquisition target, or undergo a financial
restructuring.
What else catches the portfolio co-managers' eyes? Companies whose
managements own their own stock. These companies usually seek to build
shareholder wealth by buying back shares or making acquisitions that have a
swift and positive impact on the bottom line.
To increase the upside potential, the managers zero in on companies that
dominate their industries or their specialized niches. The managers' reasoning?
Market leaders tend to earn higher levels of profits.
NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO
Securities for this Portfolio are selected through a two-phase process.
The first is financial. The portfolio manager analyzes a universe of companies
according to NB Management's value-oriented philosophy and looks for stocks
which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. NB Management's social
research is based on the same kind of philosophy that governs its financial
approach: NB Management believes that first-hand knowledge and experience are
its most important tools. Utilizing a database, the portfolio manager does
careful, in-depth tracking and analyzes a large number of companies on some
eighty issues in six broad social categories. The manager uses a wide variety of
sources to determine company practices and policies in these areas. Performance
is analyzed in light of knowledge of the issues and of the best practices in
each industry.
Under normal conditions, at least 65% of the Portfolio's total assets are
invested in accordance with its Social Policy, and at least 65% of its total
assets are invested in equity securities. The Portfolio expects that
substantially all of its equity securities will be selected in accordance with
the Social Policy. On occasion, the portfolio manager may consider deposits with
community banks and credit unions for investment. The Portfolio may engage in
portfolio techniques that are not subject to the Social Policy, such as lending
securities and purchasing and selling put and call options on securities and
currencies, futures contracts, options on futures contracts, and forward
contracts.
10
<PAGE>
The portfolio manager understands that, for many issues and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection
process?
A: Our first question is always: On financial grounds alone, is a
company a smart investment? For a company's stock to meet our financial test, it
must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
Portfolios. More specifically, we search for companies that we believe have
terrific products, excellent customer service, and solid balance sheets -- but
because they may have missed quarterly earnings expectations by a few pennies,
because their sectors are currently out of favor, because Wall Street
overreacted to a temporary setback, or because the company's merits aren't
widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not all we
examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger Berman each year, and we're also frequently on the
road visiting dozens of corporations. From Neuberger Berman SOCIALLY RESPONSIVE
Trust's inception, we've met with representatives of every company we own.
When we're face to face with a CEO, we're searching for answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the management team make it happen?" We've analyzed companies for over
three decades, and we always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what matters the
most to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending.
Or increase its dividend payments.
When a company generates lots of excess cash flow, it has growth capital
at its disposal. It can invest for higher profits down the line and improve
shareholder value. Determining exactly HOW a company intends to spend its excess
cash is an entirely different matter -- and that's where the information learned
in our company meetings comes in. Still, you've got to have the extra cash in
the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
11
<PAGE>
A: After we're convinced of a company's merits on financial grounds
alone, we review its record as a corporate citizen. In particular, we look for
evidence of leadership in three key areas: concern for the environment,
workplace diversity, and enlightened employment practices.
It should be clear that our social screening always takes place after we
search far and wide for what we believe are the best investment opportunities
available. This is a crucial point, and an analogy can be used to explain it.
Let's assume you're looking to fill a vital position in your company. What you'd
pay attention to first is the candidate's competence: Can he or she do the job?
So after interviewing a number of candidates, you'd narrow your list to those
that are highly qualified. To choose from this smaller group, you might look at
the candidate's personality: Can he or she get along with everyone in your
group?
Obviously, you wouldn't hire an unqualified person simply because he or
she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts. How do
we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of looking
for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to Neuberger Berman SOCIALLY
RESPONSIVE Trust?
A: Our shareholders are looking to invest for the future in more ways
than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
NEUBERGER BERMAN INTERNATIONAL PORTFOLIO
Equity portfolios consisting solely of domestic investments generally have
not enjoyed the higher returns foreign opportunities can offer. Over the past
thirty years, for example, the average growth rates of many foreign economies
have outpaced that of the United States. While the United States accounted for
almost 66% of the world's total securities market capitalization in 1970, it
12
<PAGE>
accounted for less than 30% of that total at the end of 1996 -- or less than a
third of the dollar value of the world's available stocks and bonds.2/
Over time, a number of international equity markets have outperformed
their U.S. counterpart. Although there are no guarantees, foreign markets could
continue to provide attractive investment opportunities.
In addition, according to Morgan Stanley Capital International, the
leading companies in any given sector are not always U.S.-based. For example,
all ten of the largest construction companies, nine of the ten largest banks and
seven of the ten largest automobile companies are based outside of the United
States.
A principal advantage of investing overseas is diversification. A
diversified portfolio gives investors the opportunity to pursue increased
overall return while reducing risk. It is prudent to diversify by taking
advantage of investment opportunities in more than one country's stock or bond
market. By investing in several countries through a worldwide portfolio,
investors can lower their exposure and vulnerability to weakness in any one
market. Investors should be aware, however, that international investing is not
a guarantee against market risk and may be affected by the economic and other
factors described in the Prospectus. These include the prospects of individual
companies and other risks such as currency fluctuations or controls,
expropriation, nationalization and confiscatory taxation.
Furthermore, buying foreign stocks and bonds can be difficult for the
individual investor and involves many decisions. Accessing international markets
is complicated; few individuals have the time or resources to evaluate
thoroughly foreign companies and markets or the ability to incur the high
transaction costs of direct investment in such markets. A mutual fund investing
in foreign securities offers an investor broad diversification at a relatively
low cost.
At least 65% of the Portfolio's total assets normally are invested in
equity securities of foreign issuers. The Portfolio invests primarily in equity
securities of companies located in developed foreign economies, as well as in
"emerging markets." In all cases, NB Management's investment process includes a
combination of "top-down country allocation" and "bottom-up security selection."
The Portfolio may use leverage to facilitate transactions it enters into for
hedging purposes.
The portfolio manager searches the world for investment opportunities
wherever and whenever they arise -- in both developed and emerging markets.
First, the portfolio manager looks for countries with strong potential for
growth. NB Management believes that the majority of the total return in a global
equity portfolio can be attributed to country allocation. The Portfolio's stock
selection process leads to diversification across more than 20 countries that
the manager believes offer the best value.
Then, the portfolio manager focuses on individual companies. The portfolio
manager looks at the fundamentals. Does the company lead its market niche? How
strong is its management? If the company is small, has it shown sustained
growth? In general, the Portfolio's selection process leads to investments in
- -----------------------
2/ Source: Morgan Stanley Capital International.
13
<PAGE>
mid-sized companies in developed countries and larger, more established firms in
emerging markets such as Hungary and Singapore.
Top-down approach to regional and country diversification
NB Management uses extensive economic research to identify countries that
offer attractive investment opportunities, by analyzing factors such as growth
rates of gross domestic product, interest rate trends, and currency exchange
rates. Market valuations, combined with correlation and volatility comparisons,
provide NB Management with a target allocation across twenty or more countries.
Bottom-up approach to security selection
NB Management's value-oriented approach seeks out attractively priced
issues, by concentrating on criteria such as a low price-to-earnings ratio
relative to earnings growth rate, balance sheet strength, low price to cash
flow, and management quality. Typically, the Portfolio's investment portfolio is
comprised of over 100 different securities issues.
Currency risk management
Exchange rate movements and volatility are important factors in
international investing. The portfolio manager believes in actively managing the
Portfolio's currency exposure, in an effort to capitalize on foreign currency
trends and to reduce overall portfolio volatility. Currency risk management is
performed separately from equity analysis. The portfolio manager uses a
combination of economic analysis to guide the Portfolio's longer-term posture
and quantitative trend analysis to assist in timing decisions with respect to
whether (or when) to invest in instruments denominated in a particular foreign
currency, or whether (or when) to hedge particular foreign currencies in which
liquid foreign exchange markets exist.
For much of the past two decades, international stocks, on average, have
outperformed U.S. stocks. If you had invested $10,000 in the international
stocks that comprise the EAFE(R) Index and the U.S. stocks that make up the S&P
"500" Index twenty years ago, here's what your investments would have been worth
as of December 31, 1997 and August 31, 1998:
14
<PAGE>
Value of investment Avg. annual total RETURN2/
12/31/97 8/31/98 12/31/97 8/31/98
-------- ------- -------- -------
International stocks
(EAFE(REGISTERED)) $146,984 $116,777 +14.38% +13.08%
Domestic stocks (S&P "500") $215,861 $192,293 +16.60% +15.93%
Of course, these historical results may not continue in the future.
Investors should keep in mind the greater risks inherent in foreign markets,
such as currency exchange fluctuations, interest rates, and potentially adverse
economic and political conditions.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: Why should investors allocate a portion of their assets to
international markets?
A: First, an investor who does not invest internationally misses out on
about two-thirds of the world's potential investment opportunities. The U.S.
stock market today represents less than one-third of the world's stock market
capitalization, and the U.S. portion continues to shrink as other countries
around the world introduce or expand the size of their equity markets.
Privatizations of government-owned corporations, initial public offerings, and
the occasional creation of official stock exchanges in emerging economies
continuously present new opportunities for capital in an expanding global
market.
Second, many foreign economies are in earlier stages of development than
ours and are growing fast. Economic growth can often mean potential for
investment growth.
Finally, international investing helps an investor increase
diversification, which can reduce risk. Domestic and foreign markets generally
do not all move in the same direction, so gains in one market may offset losses
in another.
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by international
investing. Fluctuations in exchange rates can either add to or reduce an
investor's returns. Anyone who invests in foreign markets should keep that fact
in mind.
Other risks include, but are not limited to, greater market volatility,
less government supervision and availability of public information, and the
possibility of adverse economic or political developments. Additional special
risks of foreign investing are discussed in the Prospectus.
- ------------------
2/ Total return includes reinvestment of all dividends and other distributions.
The EAFE(R) Index, also known as the Morgan Stanley Capital International
Europe, Australasia, Far East Index, is an unmanaged index of over 1,000 foreign
stock prices and is translated into U.S. dollars. The S&P "500" Index is an
unmanaged index generally considered to be representative of U.S. stock market
activity. Indices do not take into account brokerage commissions or other fees
and expenses of investing in the individual securities that they track. Data
about the performance of these indices are prepared or obtained by NB
Management.
15
<PAGE>
Q: What are some of the advantages of investing in an international
fund?
A: An international mutual fund can be a convenient way to invest
internationally and diversify assets among several markets to reduce risk.
Additionally, the considerable burden of searching for timely, accurate, and
comprehensive information about foreign economies and securities is left to
professional managers.
Q: What is your investment approach?
A: We seek to capitalize on investments in countries where we believe
that positive economic and political factors are likely to produce above-average
returns. Studies have shown that the allocation of assets among countries is
typically the most important factor contributing to portfolio performance. We
believe that, in the long term, a nation's economic growth and the performance
of its equity market are highly correlated. Therefore, we continuously evaluate
the global economic outlook as well as individual country data to guide country
allocation. Our process also leads to diversification across many countries,
typically twenty or more, in an effort to limit total portfolio risk.
We strive to invest in companies within the selected countries that are in
the best position to capitalize on such positive developments or companies that
are most attractively valued. We usually include in the Portfolio's investments
the securities of large-capitalization companies, determined in relation to the
appropriate national market, as well as securities of faster-growing, small- and
medium-sized companies that offer potentially higher returns but are often
associated with higher risk.
The criteria for security selection focus on companies with leadership in
specific markets or with niches in specific industries, which appear to exhibit
positive fundamentals and seem undervalued relative to their earnings potential
or the worth of their assets. Typically, in emerging markets, we invest in
relatively large, established companies that we believe possess the managerial,
financial, and marketing strength to exploit successfully the growth of a
dynamic economy. In more developed markets, such as Europe and Japan, the
Portfolio may invest to a higher degree in medium-sized companies. Medium-sized
companies can often provide above-average growth and are less followed by market
analysts, which sometimes leads to inefficient valuation.
Finally, we strive to limit total portfolio volatility and protect the
value of portfolio securities by selectively hedging the Portfolio's foreign
currency exposure in times when we expect the U.S. dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment opportunities
around the world. Many equity markets still have not reached the maturity stage
of the U.S. market and have much more room to grow. There are new markets
opening up to foreign investment and many changes are occurring in markets where
equity investments have traditionally commanded less attention than fixed income
securities.
Q: Compared to the stock market in the United States, are there more
anomalies in security pricing abroad?
16
<PAGE>
A: Well, the rest of the world is not as well followed as the United
States. So you'll find more anomalies. At the same time, though, the level of
analysis of companies around the world is improving every day, and the gap in
coverage is narrowing.
What never changes is the psychology of the investor -- you regularly see
either despair or euphoria in different sectors of every INTERNATIONAL market.
That, in our opinion, creates opportunities to find undiscovered gems at
extraordinarily cheap prices.
These opportunities can come from, say, uncertainty over an election going
one way or another. Investors may see the outcome as totally disastrous for a
country -- or as totally euphoric. Then, reality sets in, and things are never
as bleak or as wonderful as they had been painted.
Q: Do you integrate ideas from Neuberger Berman's research and the
domestic portfolio managers?
A: Oh, sure. As everyone knows, the world is becoming smaller, and
certain industries are becoming global (or have become global). Whether one
thinks about technology, pharmaceuticals, medical devices, or the automobile
industry, it's really become one world market. So it's crucial to have good
knowledge about BOTH the United States and the areas outside the United States
where these companies dominate.
NEUBERGER BERMAN MILLENNIUM PORTFOLIO
(To be provided by NBMI)
* * * * *
Each Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of any Portfolio's total assets. Of course,
each Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
Some or all of the Portfolios, as indicated below, may make the following
investments, among others, although they may not buy all of the types of
securities or use all of the investment techniques that are described.
ILLIQUID SECURITIES. (ALL PORTFOLIOS). Illiquid securities are securities
that cannot be expected to be sold within seven days at approximately the price
at which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless NB Management, acting
pursuant to guidelines established by the trustees of the Managers Trusts,
determines they are liquid. Generally, foreign securities freely tradable in
their principal market are not considered restricted or illiquid. Illiquid
17
<PAGE>
securities may be difficult for a Portfolio to value or dispose of due to the
absence of an active trading market. The sale of some illiquid securities by the
Portfolios may be subject to legal restrictions which could be costly to the
Portfolios.
POLICIES AND LIMITATIONS. Each Portfolio may invest up to 15% of its
net assets in illiquid securities.
REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a repurchase agreement, a
Portfolio purchases securities from a bank that is a member of the Federal
Reserve System (or, in the case of Neuberger Berman INTERNATIONAL Portfolio,
also from a foreign bank or a U.S. branch or agency of a foreign bank) or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Costs, delays, or losses
could result if the selling party to a repurchase agreement becomes bankrupt or
otherwise defaults. NB Management monitors the creditworthiness of sellers. If
Neuberger Berman INTERNATIONAL Portfolio enters into a repurchase agreement
subject to foreign law and the counter-party defaults, that Portfolio may not
enjoy protections comparable to those provided to certain repurchase agreements
under U.S. bankruptcy law and may suffer delays and losses in disposing of the
collateral as a result.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. No Portfolio may enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would then be invested in
such repurchase agreements and other illiquid securities. A Portfolio may enter
into a repurchase agreement only if (1) the underlying securities are of a type
that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent.
SECURITIES LOANS (ALL PORTFOLIOS). Each Portfolio may lend securities to
unaffiliated entities, including banks, brokerage firms, and other institutional
investors judged creditworthy by NB Management, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the loaned securities,
is continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some risk of
loss of rights in the collateral should the borrower fail financially.
18
<PAGE>
POLICIES AND LIMITATIONS. Each Portfolio may lend portfolio securities
with a value not exceeding 33-1/3% of its total assets to banks, brokerage
firms, or other institutional investors judged creditworthy by NB Management.
Borrowers are required continuously to secure their obligations to return
securities on loan from a Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
Securities lending by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not
subject to the Social Policy.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS). Each
Portfolio may invest in restricted securities, which are securities that may not
be sold to the public without an effective registration statement under the 1933
Act. Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, a Portfolio may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio Trustees
believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities, including
Rule 144A securities, are illiquid, purchases thereof will be subject to each
Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a reverse repurchase
agreement, a Portfolio sells portfolio securities subject to its agreement to
repurchase the securities at a later date for a fixed price reflecting a market
rate of interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of each Portfolio's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, a
19
<PAGE>
Portfolio will deposit in a segregated account with its custodian cash or
appropriate liquid securities, marked to market daily, in an amount at least
equal to the Portfolio's obligations under the agreement.
LEVERAGE (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio may
make investments while borrowings are outstanding. Leverage creates an
opportunity for increased net income but, at the same time, creates special risk
considerations. For example, leverage may amplify changes in the Portfolio's and
its corresponding Fund's net asset values ("NAV's"). Although the principal of
such borrowings will be fixed the Portfolio's assets may change in value during
the time the borrowing is outstanding. Leverage creates interest expenses for
the Portfolio. To the extent the income derived from securities purchased with
borrowed funds exceeds the interest the Portfolio will have to pay, the
Portfolio's net income will be greater than it would be if leverage were not
used. Conversely, if the income from the assets obtained with borrowed funds is
not sufficient to cover the cost of leveraging, the net income of the Portfolio
will be less than it would be if leverage were not used, and therefore the
amount available for distribution to the Fund's shareholders as dividends will
be reduced. Reverse repurchase agreements create leverage and are considered
borrowings for the purposes of the Portfolio's investment limitations.
POLICIES AND LIMITATIONS. Generally, the Portfolio does not intend to use
leverage for investment purposes. It may, however, use leverage to purchase
securities needed to close out short sales entered into for hedging purposes and
to facilitate other hedging transactions.
FOREIGN SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. While investments in foreign securities are intended to reduce
risk by providing further diversification, such investments involve sovereign
and other risks, in addition to the credit and market risks normally associated
with domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability,
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
Each Portfolio also may invest in equity, debt, or other income-producing
securities that are denominated in or indexed to foreign currencies, including
(1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (3) obligations of other
corporations, and (4) obligations of foreign governments and their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding paragraph, and the additional risks of (1) adverse changes in foreign
exchange rates, and (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the United
States). Additionally, dividends and interest payable on foreign securities may
be subject to foreign taxes, including taxes withheld from those payments.
Commissions on foreign securities exchanges are often at fixed rates and are
20
<PAGE>
generally higher than negotiated commissions on U.S. exchanges, although the
Portfolios endeavor to achieve the most favorable net results on portfolio
transactions.
Foreign securities often trade with less frequency and in less volume than
domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement procedures.
In certain markets, there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of a Portfolio are uninvested and no return
is earned thereon. The inability of a Portfolio to make intended security
purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Portfolio due
to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
Neuberger Berman INTERNATIONAL and Neuberger Berman MILLENNIUM Portfolios
may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or unsponsored) are
receipts typically issued by a U.S. bank or trust company evidencing its
ownership of the underlying foreign securities. Most ADRs are denominated in
U.S. dollars and are traded on a U.S. stock exchange. Issuers of the securities
underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated
to disclose material information in the United States. Therefore, the market
value of unsponsored ADRs may not reflect the effect of such information. EDRs
and IDRs are receipts typically issued by a European bank or trust company
evidencing its ownership of the underlying foreign securities. GDRs are receipts
issued by either a U.S. or non-U.S. banking institution evidencing its ownership
of the underlying foreign securities and are often denominated in U.S. dollars.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, a Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, no Portfolio is restricted in the
amount it may invest in securities denominated in any one foreign currency.
Neuberger Berman INTERNATIONAL Portfolio invests primarily in foreign
securities.
Investments in securities of foreign issuers are subject to each
Portfolio's quality standards. Each Portfolio (except Neuberger Berman
INTERNATIONAL Portfolio) may invest only in securities of issuers in countries
whose governments are considered stable by NB Management.
21
<PAGE>
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES (NEUBERGER BERMAN
INTERNATIONAL PORTFOLIO). The Portfolio may purchase securities on a when-issued
basis and may purchase or sell securities on a forward commitment basis. These
transactions involve a commitment by the Portfolio to purchase or sell
securities at a future date (ordinarily within two months, although the
Portfolio may agree to a longer settlement period). The price of the underlying
securities (usually expressed in terms of yield) and the date when the
securities will be delivered and paid for (the settlement date) are fixed at the
time the transaction is negotiated. When-issued purchases and forward commitment
transactions are negotiated directly with the other party, and such commitments
are not traded on exchanges.
When-issued purchases and forward commitment transactions enable the
Portfolio to "lock in" what NB Management believes to be an attractive price or
yield on a particular security for a period of time, regardless of future
changes in interest rates. For instance, in periods of rising interest rates and
falling prices, the Portfolio might sell securities it owns on a forward
commitment basis to limit its exposure to falling prices. In periods of falling
interest rates and rising prices, the Portfolio might purchase a security on a
when-issued or forward commitment basis and sell a similar security to settle
such purchase, thereby obtaining the benefit of currently higher yields. If the
seller fails to complete the sale, the Portfolio may lose the opportunity to
obtain a favorable price.
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of the Portfolio's NAV starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date. When the Portfolio makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Portfolio's assets. Fluctuations in the market
value of the underlying securities are not reflected in the Portfolio's NAV as
long as the commitment to sell remains in effect.
POLICIES AND LIMITATIONS. The Portfolio will purchase securities on a
when-issued basis or purchase or sell securities on a forward commitment basis
only with the intention of completing the transaction and actually purchasing or
selling the securities. If deemed advisable as a matter of investment strategy,
however, the Portfolio may dispose of or renegotiate a commitment after it has
been entered into. The Portfolio also may sell securities it has committed to
purchase before those securities are delivered to the Portfolio on the
settlement date. The Portfolio may realize capital gains or losses in connection
with these transactions.
When the Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio will deposit in a segregated account with its
custodian, until payment is made, appropriate liquid securities having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the custodian will hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio maintains sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitment transactions.
Futures, Options on Futures, Options on Securities and Indices, Forward
Contracts, and Options on Foreign Currencies (collectively, "Financial
Instruments")
22
<PAGE>
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER BERMAN MILLENNIUM,
INTERNATIONAL, SOCIALLY RESPONSIVE, GUARDIAN AND FOCUS PORTFOLIOS). Neuberger
Berman SOCIALLY RESPONSIVE and MILLENNIUM Portfolios may purchase and sell
interest rate futures contracts, stock and bond index futures contracts, and
foreign currency futures contracts and may purchase and sell options thereon in
an attempt to hedge against changes in the prices of securities or, in the case
of foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits each
Portfolio to enhance portfolio liquidity and maintain a defensive position
without having to sell portfolio securities. Each Portfolio views investment in
(i) interest rate and securities index futures and options thereon as a maturity
management device and/or a device to reduce risk or preserve total return in an
adverse environment for the hedged securities, and (ii) foreign currency futures
and options thereon as a means of establishing more definitely the effective
return on, or the purchase price of, securities denominated in foreign
currencies that are held or intended to be acquired by the Portfolio.
Neuberger Berman INTERNATIONAL Portfolio may enter into futures contracts
on currencies, debt securities, interest rates, and securities indices that are
traded on exchanges regulated by the Commodity Futures Trading Commission
("CFTC") or on foreign exchanges. Trading on foreign exchanges is subject to the
legal requirements of the jurisdiction in which the exchange is located and to
the rules of such foreign exchange.
Neuberger Berman INTERNATIONAL Portfolio may sell futures contracts in
order to offset a possible decline in the value of its portfolio securities.
When a futures contract is sold by the Portfolio, the value of the contract will
tend to rise when the value of the portfolio securities declines and will tend
to fall when the value of such securities increases. The Portfolio may purchase
futures contracts in order to fix what NB Management believes to be a favorable
price for securities the Portfolio intends to purchase. If a futures contract is
purchased by the Portfolio, the value of the contract will tend to change
together with changes in the value of such securities. To compensate for
differences in historical volatility between positions Neuberger Berman
INTERNATIONAL Portfolio wishes to hedge and the standardized futures contracts
available to it, the Portfolio may purchase or sell futures contracts with a
greater or lesser value than the securities it wishes to hedge.
With respect to currency futures, Neuberger Berman INTERNATIONAL Portfolio
may sell a futures contract or a call option, or it may purchase a put option on
such futures contract, if NB Management anticipates that exchange rates for a
particular currency will fall. Such a transaction will be used as a hedge (or,
in the case of a sale of a call option, a partial hedge) against a decrease in
the value of portfolio securities denominated in that currency. If NB Management
anticipates that a particular currency will rise, Neuberger Berman INTERNATIONAL
Portfolio may purchase a currency futures contract or a call option to protect
against an increase in the price of securities which are denominated in that
currency and which the Portfolio intends to purchase. The Portfolio may also
purchase a currency futures contract or a call option thereon for non-hedging
purposes when NB Management anticipates that a particular currency will
appreciate in value, but securities denominated in that currency do not present
an attractive investment and are not included in the Portfolio.
Neuberger Berman GUARDIAN and FOCUS Portfolios each may purchase and sell
stock index futures contracts, and may purchase and sell options thereon. For
23
<PAGE>
purposes of managing cash flow, the managers may use such futures and options to
increase each Portfolio's exposure to the performance of a recognized securities
index, such as the S&P "500" Index.
A "sale" of a futures contract (or a "short" futures position) entails the
assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. The exchange's affiliated clearing
organization guarantees performance of the contracts between the clearing
members of the exchange.
Although futures contracts by their terms may require the actual delivery
or acquisition of the underlying securities or currency, in most cases the
contractual obligation is extinguished by being offset before the expiration of
the contract. A futures position is offset by buying (to offset an earlier sale)
or selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month. This may result in a profit or loss. While
futures contracts entered into by a Portfolio will usually be liquidated in this
manner, the Portfolio may instead make or take delivery of underlying securities
whenever it appears economically advantageous for it to do so.
"Margin" with respect to a futures contract is the amount of assets that
must be deposited by a Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing their
NAVs, the Portfolios mark to market the value of their open futures positions.
Each Portfolio also must make margin deposits with respect to options on futures
that it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume a short futures position (if the
option is a call) or a long futures position (if the option is a put). Upon
exercise of the option, the accumulated cash balance in the writer's futures
margin account is delivered to the holder of the option. That balance represents
the amount by which the market price of the futures contract at exercise
24
<PAGE>
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option. Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.
Although each of Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE,
INTERNATIONAL, GUARDIAN and FOCUS Portfolios believes that the use of futures
contracts will benefit it, if NB Management's judgment about the general
direction of the markets or about interest rate or currency exchange rate trends
is incorrect, the Portfolio's overall return would be lower than if it had not
entered into any such contracts. The prices of futures contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest or currency exchange rates, which in turn are affected by fiscal and
monetary policies and by national and international political and economic
events. At best, the correlation between changes in prices of futures contracts
and of securities being hedged can be only approximate due to differences
between the futures and securities markets or differences between the securities
or currencies underlying a Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the price
of a futures contract or option thereon during a single trading day; once the
daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by a Portfolio, it could (depending on the size of the position)
have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. Neuberger Berman MILLENNIUM and SOCIALLY
RESPONSIVE Portfolios may purchase and sell futures contracts and may purchase
and sell options thereon in an attempt to hedge against changes in the prices of
securities or, in the case of foreign currency futures and options thereon, to
hedge against prevailing currency exchange rates. Neither Portfolio engages in
transactions in futures and options on futures for speculation. The use of
futures and options on futures by Neuberger Berman SOCIALLY RESPONSIVE Portfolio
is not subject to the Social Policy.
Neuberger Berman INTERNATIONAL Portfolio may purchase and sell futures for
BONA FIDE hedging purposes, as defined in regulations of the CFTC, and for
non-hedging purposes (I.E., in an effort to enhance income) as defined in
regulations of the CFTC. The Portfolio may also purchase and write put and call
options on such futures contracts for BONA FIDE hedging and non-hedging
purposes.
Neuberger Berman GUARDIAN and FOCUS Portfolios may purchase and sell stock
index futures contracts, and may purchase and sell options thereon. For purposes
25
<PAGE>
of managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P 500.
CALL OPTIONS ON SECURITIES (ALL PORTFOLIOS). Neuberger Berman MILLENNIUM,
SOCIALLY RESPONSIVE and INTERNATIONAL Portfolios may write covered call options
and may purchase call options on securities. Each of the other Portfolios may
write covered call options and may purchase call options in related closing
transactions. The purpose of writing call options is to hedge (i.e., to reduce,
at least in part, the effect of price fluctuations of securities held by the
Portfolio on the Portfolio's and its corresponding Fund's NAVs) or to earn
premium income. Portfolio securities on which call options may be written and
purchased by a Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective.
When a Portfolio writes a call option, it is obligated to sell a security
to a purchaser at a specified price at any time until a certain date if the
purchaser decides to exercise the option. The Portfolio receives a premium for
writing the call option. So long as the obligation of the call option continues,
the Portfolio may be assigned an exercise notice, requiring it to deliver the
underlying security against payment of the exercise price. The Portfolio may be
obligated to deliver securities underlying an option at less than the market
price.
The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk but is capable of enhancing
the Portfolios' total return. When writing a covered call option, a Portfolio,
in return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but conversely
retains the risk of loss should the price of the security decline.
If a call option that a Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When a Portfolio purchases a call option, it pays a premium for the right
to purchase a security from the writer at a specified price until a specified
date.
POLICIES AND LIMITATIONS. Each Portfolio may write covered call options
and may purchase call options in related closing transactions. Each Portfolio
writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Portfolios will not do).
A Portfolio would purchase a call option to offset a previously written
call option. Each of Neuberger Berman MILLENNIUM and SOCIALLY RESPONSIVE
Portfolios also may purchase a call option to protect against an increase in the
price of the securities it intends to purchase. The use of call options on
securities by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not subject to
the Social Policy, Neuberger Berman INTERNATIONAL Portfolio may purchase call
options for hedging or non-hedging purposes.
26
<PAGE>
PUT OPTIONS ON SECURITIES (NEUBERGER BERMAN MILLENNIUM, SOCIALLY
RESPONSIVE AND INTERNATIONAL PORTFOLIO). The Portfolio may write and
purchase put options on securities.
Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE or INTERNATIONAL
Portfolio will receive a premium for writing a put option, which obligates the
Portfolio to acquire a security at a certain price at any time until a certain
date if the purchaser decides to exercise the option. The Portfolio may be
obligated to purchase the underlying security at more than its current value.
When Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE or INTERNATIONAL
Portfolio purchases a put option, it pays a premium to the writer for the right
to sell a security to the writer for a specified amount at any time until a
certain date. The Portfolio would purchase a put option in order to protect
itself against a decline in the market value of a security it owns.
Portfolio securities on which put options may be written and purchased by
Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE or INTERNATIONAL Portfolio are
purchased solely on the basis of investment considerations consistent with the
Portfolio's investment objective. When writing a put option, the Portfolio, in
return for the premium, takes the risk that it must purchase the underlying
security at a price that may be higher than the current market price of the
security. If a put option that the Portfolio has written expires unexercised,
the Portfolio will realize a gain in the amount of the premium.
POLICIES AND LIMITATIONS. Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE
and INTERNATIONAL Portfolios generally write and purchase put options on
securities for hedging purposes (I.E., to reduce, at least in part, the effect
of price fluctuations of securities held by the Portfolio on the Portfolio's and
its corresponding Fund's NAVs). However, Neuberger Berman INTERNATIONAL
Portfolio also may use put options for non-hedging purposes. The use of put
options on securities by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not
subject to the Social Policy.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. Neuberger
Berman INTERNATIONAL Portfolio also may purchase European-style options, which
are exercisable only immediately prior to their expiration date. The obligation
under any option written by a Portfolio terminates upon expiration of the option
or, at an earlier time, when the Portfolio offsets the option by entering into a
"closing purchase transaction" to purchase an option of the same series. If an
option is purchased by a Portfolio and is never exercised or closed out, the
Portfolio will lose the entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in the
over-the-counter ("OTC") market. Neuberger Berman INTERNATIONAL Portfolio may
also purchase and sell options that are traded on foreign exchanges.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed; the clearing organization in effect
guarantees completion of every exchange-traded option. In contrast, OTC options
are contracts between a Portfolio and a counter-party, with no clearing
27
<PAGE>
organization guarantee. Thus, when a Portfolio sells (or purchases) an OTC
option, it generally will be able to "close out" the option prior to its
expiration only by entering into a closing transaction with the dealer to whom
(or from whom) the Portfolio originally sold (or purchased) the option. There
can be no assurance that the Portfolio would be able to liquidate an OTC option
at any time prior to expiration. Unless a Portfolio is able to effect a closing
purchase transaction in a covered OTC call option it has written, it will not be
able to liquidate securities used as cover until the option expires or is
exercised or until different cover is substituted. In the event of the
counter-party's insolvency, a Portfolio may be unable to liquidate its options
position and the associated cover. NB Management monitors the creditworthiness
of dealers with which a Portfolio may engage in OTC options transactions.
The premium received (or paid) by a Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by a Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits Neuberger Berman
MILLENNIUM, SOCIALLY RESPONSIVE or INTERNATIONAL Portfolio to write another call
option on the underlying security with a different exercise price or expiration
date or both. There is, of course, no assurance that a Portfolio will be able to
effect closing transactions at favorable prices. If a Portfolio cannot enter
into such a transaction, it may be required to hold a security that it might
otherwise have sold (or purchase a security that it would not have otherwise
bought), in which case it would continue to be at market risk on the security.
A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
A Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. From time to time, Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE
or INTERNATIONAL Portfolio may purchase an underlying security for delivery in
accordance with an exercise notice of a call option assigned to it, rather than
delivering the security from its portfolio. In those cases, additional brokerage
commissions are incurred.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets.
28
<PAGE>
POLICIES AND LIMITATIONS. Each Portfolio may use American-style options.
Neuberger Berman INTERNATIONAL Portfolio may also purchase European-style
options and may purchase and sell options that are traded on foreign exchanges.
The assets used as cover (or held in a segregated account) for OTC options
written by a Portfolio will be considered illiquid unless the OTC options are
sold to qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC call option written subject to this
procedure will be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
The use of put and call options by Neuberger Berman SOCIALLY RESPONSIVE
Portfolio is not subject to the Social Policy.
PUT AND CALL OPTIONS ON SECURITIES INDICES (NEUBERGER BERMAN
INTERNATIONAL, GUARDIAN AND FOCUS PORTFOLIOS). Neuberger Berman International
Portfolio may purchase put and call options on securities indices for the
purpose of hedging against the risk of price movements that would adversely
affect the value of the Portfolio's securities or securities the Portfolio
intends to buy. The Portfolio may write securities index options to close out
positions in such options that it has purchased.
For purposes of managing cash flow, Neuberger Berman GUARDIAN and FOCUS
Portfolios each may purchase put and call options on securities indices to
increase the Portfolio's exposure to the performance of a recognized securities
index, such as the S&P "500" Index.
Unlike a securities option, which gives the holder the right to purchase
or sell a specified security at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (1) the difference between the exercise price of the option and the
value of the underlying securities index on the exercise date (2) multiplied by
a fixed "index multiplier." A securities index fluctuates with changes in the
market values of the securities included in the index. Options on stock indices
are currently traded on the Chicago Board Options Exchange, the New York Stock
Exchange ("NYSE"), the American Stock Exchange, and other U.S. and foreign
exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks similar to those
of securities options, as discussed herein.
POLICIES AND LIMITATIONS. Neuberger Berman INTERNATIONAL Portfolio may
purchase put and call options on securities indices for the purpose of hedging.
All securities index options purchased by the Portfolio will be listed and
traded on an exchange. The Portfolio currently does not expect to invest a
substantial portion of its assets in securities index options.
29
<PAGE>
For purposes of managing cash flow, Neuberger Berman GUARDIAN and FOCUS
Portfolios each may purchase put and call options on securities indices to
increase the Portfolio's exposure to the performance of a recognized securities
index, such as the S&P "500" Index. All securities index options purchased by
Neuberger Berman GUARDIAN and FOCUS Portfolios will be listed and traded on an
exchange.
FOREIGN CURRENCY TRANSACTIONS (ALL PORTFOLIOS). Each Portfolio may enter
into contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolios may also engage in foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Portfolios (other than Neuberger Berman INTERNATIONAL Portfolio) enter
into forward contracts in an attempt to hedge against changes in prevailing
currency exchange rates. The Portfolios do not engage in transactions in forward
contracts for speculation; they view investments in forward contracts as a means
of establishing more definitely the effective return on, or the purchase price
of, securities denominated in foreign currencies. Forward contract transactions
include forward sales or purchases of foreign currencies for the purpose of
protecting the U.S. dollar value of securities held or to be acquired by a
Portfolio or protecting the U.S. dollar equivalent of dividends, interest, or
other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, a Portfolio
may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Portfolio
chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of portfolio securities denominated in such
currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate risks
perfectly, and, if NB Management is incorrect in its judgment of future exchange
rate relationships, a Portfolio could be in a less advantageous position than if
30
<PAGE>
such a hedge had not been established. If a Portfolio uses proxy-hedging, it may
experience losses on both the currency in which it has invested and the currency
used for hedging if the two currencies do not vary with the expected degree of
correlation. Using forward contracts to protect the value of a Portfolio's
securities against a decline in the value of a currency does not eliminate
fluctuations in the prices of the underlying securities. Because forward
contracts are not traded on an exchange, the assets used to cover such contracts
may be illiquid. A Portfolio may experience delays in the settlement of its
foreign currency transactions.
Neuberger Berman INTERNATIONAL Portfolio may purchase securities of an
issuer domiciled in a country other than the country in whose currency the
instrument is denominated. The Portfolio may invest in securities denominated in
the European Currency Unit ("ECU"), which is a "basket" consisting of a
specified amount of the currencies of certain of the member states of the
European Union. The specific amounts of currencies comprising the ECU may be
adjusted by the Council of Ministers of the European Union from time to time to
reflect changes in relative values of the underlying currencies. The market for
ECUs may become illiquid at times of uncertainty or rapid change in the European
currency markets, limiting the Portfolio's ability to prevent potential losses.
In addition, Neuberger Berman INTERNATIONAL Portfolio may invest in securities
denominated in other currency baskets.
POLICIES AND LIMITATIONS. The Portfolios (other than Neuberger Berman
INTERNATIONAL Portfolio) may enter into forward contracts for the purpose of
hedging and not for speculation. The use of forward contracts by Neuberger
Berman SOCIALLY RESPONSIVE Portfolio is not subject to the Social Policy.
Neuberger Berman INTERNATIONAL Portfolio may enter into forward contracts
for hedging or non-hedging purposes. When the Portfolio engages in foreign
currency transactions for hedging purposes, it will not enter into forward
contracts to sell currency or maintain a net exposure to such contracts if their
consummation would obligate the Portfolio to deliver an amount of foreign
currency materially in excess of the value of its portfolio securities or other
assets denominated in that currency. Neuberger Berman INTERNATIONAL Portfolio
may also purchase and sell forward contracts for non-hedging purposes when NB
Management anticipates that a foreign currency will appreciate or depreciate in
value, but securities in that currency do not present attractive investment
opportunities and are not held in the Portfolio's investment portfolio.
OPTIONS ON FOREIGN CURRENCIES (ALL PORTFOLIOS). Each Portfolio may write
and purchase covered call and put options on foreign currencies. Neuberger
Berman INTERNATIONAL Portfolio may write (sell) put and covered call options on
any currency in order to realize greater income than would be realized on
portfolio securities alone.
Currency options have characteristics and risks similar to those of
securities options, as discussed herein. Certain options on foreign currencies
are traded on the OTC market and involve liquidity and credit risks that may not
be present in the case of exchange-traded currency options.
POLICIES AND LIMITATIONS. A Portfolio would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
31
<PAGE>
on those securities. In addition, Neuberger Berman INTERNATIONAL Portfolio may
purchase put and call options on foreign currencies for non-hedging purposes
when NB Management anticipates that a currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not included in the Portfolio. The use of
options on currencies by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not
subject to the Social Policy.
REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent a
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets. Neuberger Berman MANHATTAN, PARTNERS, and GENESIS Portfolios do not
intend to invest in futures contracts and options thereon during the coming
year.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated account
cannot be sold while the futures, options, or forward strategy covered by those
securities is outstanding, unless they are replaced with other suitable assets.
As a result, segregation of a large percentage of a Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet current
obligations. A Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. Each Portfolio will comply with SEC guidelines
regarding "cover" for Financial Instruments and, if the guidelines so require,
set aside in a segregated account with its custodian the prescribed amount of
cash or appropriate liquid securities.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by a Portfolio and the prices of Financial Instruments; (2) possible lack of a
liquid secondary market for Financial Instruments and the resulting inability to
close out Financial Instruments when desired; (3) the fact that the skills
needed to use Financial Instruments are different from those needed to select a
Portfolio's securities; (4) the fact that, although use of Financial Instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of a Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for a Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Financial Instruments.
There can be no assurance that a Portfolio's use of Financial Instruments will
be successful.
Each Portfolio's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if its corresponding Fund is to continue to qualify as a
regulated investment company ("RIC"). See "Additional Tax Information."
Financial Instruments may not be available with respect to some currencies,
especially those of so-called emerging market countries.
32
<PAGE>
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Financial Instruments whose behavior
is expected to resemble or offset that of a Portfolio's underlying securities or
currency. NB Management intends to reduce the risk that a Portfolio will be
unable to close out Financial Instruments by entering into such transactions
only if NB Management believes there will be an active and liquid secondary
market.
SHORT SALES (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). Neuberger Berman
INTERNATIONAL Portfolio may attempt to limit exposure to a possible decline in
the market value of portfolio securities through short sales of securities that
NB Management believes possess volatility characteristics similar to those being
hedged. The Portfolio also may use short sales in an attempt to realize gain. To
effect a short sale, the Portfolio borrows a security from a brokerage firm to
make delivery to the buyer. The Portfolio then is obliged to replace the
borrowed security by purchasing it at the market price at the time of
replacement. Until the security is replaced, the Portfolio is required to pay
the lender any dividends and may be required to pay a premium or interest.
Neuberger Berman INTERNATIONAL Portfolio will realize a gain if the
security declines in price between the date of the short sale and the date on
which the Portfolio replaces the borrowed security. The Portfolio will incur a
loss if the price of the security increases between those dates. The amount of
any gain will be decreased, and the amount of any loss increased, by the amount
of any premium or interest the Portfolio is required to pay in connection with
the short sale. A short position may be adversely affected by imperfect
correlation between movements in the price of the securities sold short and the
securities being hedged.
Neuberger Berman INTERNATIONAL Portfolio also may make short sales
against-the-box, in which it sells securities short only if it owns or has the
right to obtain without payment of additional consideration an equal amount of
the same type of securities sold.
The effect of short selling on the Portfolio is similar to the effect of
leverage. Short selling may amplify changes in the Portfolio's and Neuberger
Berman INTERNATIONAL Trust's NAVs. Short selling may also produce higher than
normal portfolio turnover, which may result in increased transaction costs to
the Portfolio.
POLICIES AND LIMITATIONS. Under applicable guidelines of the SEC staff, if
the Portfolio engages in a short sale (other than a short sale against-the-box),
it must put in a segregated account (not with the broker) an amount of cash or
appropriate liquid securities equal to the difference between (1) the market
value of the securities sold short at the time they were sold short and (2) any
cash or securities required to be deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short sale).
In addition, until the Portfolio replaces the borrowed security, it must daily
maintain the segregated account at such a level that (1) the amount deposited in
it plus the amount deposited with the broker as collateral equals the current
market value of the securities sold short, and (2) the amount deposited in it
plus the amount deposited with the broker as collateral is not less than the
market value of the securities at the time they were sold short.
FIXED INCOME SECURITIES (ALL PORTFOLIOS). While the emphasis of the
Portfolios' investment programs is on common stocks and other equity securities,
the Portfolios may also invest in money market instruments, U.S. Government and
Agency Securities, and other fixed income securities. Each Portfolio may invest
33
<PAGE>
in investment grade corporate bonds and debentures; Neuberger Berman PARTNERS
and INTERNATIONAL Portfolios each may invest in corporate debt securities rated
below investment grade.
U.S. Government Securities are obligations of the U.S. Treasury backed
by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are
supported by the full faith and credit of the United States, while others may
by supported by the issuer's ability to borrow from the U.S. Treasury,
subject to the Treasury's discretion in certain cases, or only by the credit
of the issuer. U.S. Government Agency Securities include U.S. Government
Agency mortgage-backed securities. The market prices of U.S. Government and
Agency Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investor Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating
organizations ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management
comparable to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest rating category (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's inability
to meet principal and interest payments on its obligations ("credit risk") and
are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of fixed income securities in which a
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of a Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
Lower-rated securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates. Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-rated
securities. Pricing of thinly traded securities requires greater judgment than
pricing of securities for which market transactions are regularly reported. NB
34
<PAGE>
Management will invest in lower-rated securities only when it concludes that the
anticipated return on such an investment to Neuberger Berman PARTNERS Portfolio
or Neuberger Berman INTERNATIONAL Portfolio warrants exposure to the additional
level of risk.
POLICIES AND LIMITATIONS. Each Portfolio normally may invest up to 35% of
its total assets in debt securities. Neuberger Berman PARTNERS Portfolio may
invest up to 15% of its net assets in corporate debt securities rated below
investment grade or Comparable Unrated Securities. Neuberger Berman
INTERNATIONAL Portfolio may invest in domestic and foreign debt securities of
any rating, including those rated below investment grade and Comparable Unrated
Securities.
Subsequent to its purchase by a Portfolio, an issue of debt securities may
cease to be rated or its rating may be reduced, so that the securities would no
longer be eligible for purchase by that Portfolio. In such a case, Neuberger
Berman MILLENNIUM and SOCIALLY RESPONSIVE Portfolios each will engage in an
orderly disposition of the downgraded securities. Each other Portfolio (except
Neuberger Berman INTERNATIONAL Portfolio) will engage in an orderly disposition
of the downgraded securities to the extent necessary to ensure that the
Portfolio's holdings of securities rated below investment grade and Comparable
Unrated Securities will not exceed 5% of its net assets (15% in the case of
Neuberger Berman PARTNERS Portfolio). NB Management will make a determination as
to whether Neuberger Berman INTERNATIONAL Portfolio should dispose of the
downgraded securities.
COMMERCIAL PAPER (ALL PORTFOLIOS). Commercial paper is a short-term debt
security issued by a corporation or bank, usually for purposes such as financing
current operations.
Each Portfolio may invest in commercial paper that cannot be resold to the
public without an effective registration statement under the 1933 Act. While
restricted commercial paper normally is deemed illiquid, NB Management may in
certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolios may invest in commercial paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality. Neuberger Berman
INTERNATIONAL Portfolio may invest in such commercial paper as a defensive
measure, to increase liquidity, or as needed for segregated accounts.
ZERO COUPON SECURITIES (NEUBERGER BERMAN PARTNERS AND NEUBERGER BERMAN
MILLENNIUM AND SOCIALLY RESPONSIVE PORTFOLIOS). Each of these Portfolios may
invest in zero coupon securities, which are debt obligations that do not entitle
the holder to any periodic payment of interest prior to maturity or that specify
a future date when the securities begin to pay current interest. Zero coupon
securities are issued and traded at a discount from their face amount or par
value. This discount varies depending on prevailing interest rates, the time
remaining until cash payments begin, the liquidity of the security, and the
perceived credit quality of the issuer.
The discount on zero coupon securities ("original issue discount") must be
taken into income ratably by each such Portfolio prior to the receipt of any
actual payments. Because its corresponding Fund must distribute substantially
all of its net income (including its share of the Portfolio's accrued original
issue discount) to its shareholders each year for income and excise tax
purposes, each such Portfolio may have to dispose of portfolio securities under
35
<PAGE>
disadvantageous circumstances to generate cash, or may be required to borrow, to
satisfy its corresponding Fund's distribution requirements. See "Additional Tax
Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. Zero coupon
securities are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having a similar maturity and credit
quality.
CONVERTIBLE SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in
convertible securities. A convertible security is a bond, debenture, note,
preferred stock, or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities generally have features of both common stocks and debt securities. A
convertible security entitles the holder to receive the interest paid or accrued
on debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, such
securities ordinarily provide a stream of income with generally higher yields
than common stocks of the same or similar issuers, but lower than the yield on
non-convertible debt. Convertible securities are usually subordinated to
comparable-tier non-convertible securities but rank senior to common stock in a
corporation's capital structure. The value of a convertible security is a
function of (1) its yield in comparison to the yields of other securities of
comparable maturity and quality that do not have a conversion privilege and (2)
its worth if converted into the underlying common stock.
The price of a convertible security often reflects variations in the price
of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by a Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and its corresponding Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. Neuberger Berman SOCIALLY RESPONSIVE Portfolio
may invest up to 20% of its net assets in convertible securities. The Portfolio
does not intend to purchase any convertible securities that are not investment
grade. Convertible debt securities are subject to each Portfolio's investment
policies and limitations concerning fixed income securities.
PREFERRED STOCK (ALL PORTFOLIOS). Each Portfolio may invest in preferred
stock. Unlike interest payments on debt securities, dividends on preferred stock
are generally payable at the discretion of the issuer's board of directors.
Preferred shareholders may have certain rights if dividends are not paid but
generally have no legal recourse against the issuer. Shareholders may suffer a
loss of value if dividends are not paid. The market prices of preferred stocks
are generally more sensitive to changes in the issuer's creditworthiness than
are the prices of debt securities.
SWAP AGREEMENTS (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio
may enter into swap agreements to manage or gain exposure to particular types of
investments (including equity securities or indices of equity securities in
which the Portfolio otherwise could not invest efficiently). In a swap
36
<PAGE>
agreement, one party agrees to make regular payments equal to a floating rate on
a specified amount in exchange for payments equal to a fixed rate, or a
different floating rate, on the same amount for a specified period.
Swap agreements may involve leverage and may be highly volatile; depending
on how they are used, they may have a considerable impact on the Portfolio's
performance. The risks of swap agreements depend upon the other party's
creditworthiness and ability to perform, as well as the Portfolio's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions. Swap agreements may be illiquid. The swap market is relatively new
and is largely unregulated.
POLICIES AND LIMITATIONS. In accordance with SEC staff requirements, the
Portfolio will segregate cash or appropriate liquid securities in an amount
equal to its obligations under swap agreements; when an agreement provides for
netting of the payments by the two parties, the Portfolio will segregate only
the amount of its net obligation, if any.
JAPANESE INVESTMENTS (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). All of
the Portfolios may invest in foreign securities, including securities of
Japanese issuers. From time to time, Neuberger Berman INTERNATIONAL Portfolio
may invest a significant portion of its assets in securities of Japanese
issuers. The performance of the Portfolio may therefore be significantly
affected by events influencing the Japanese economy and the exchange rate
between the Japanese yen and the U.S. dollar. Japan has experienced a severe
recession, including a decline in real estate values and other events that
adversely affected the balance sheets of many financial institutions and
indicate that there may be structural weaknesses in the Japanese financial
system. The effects of this economic downturn may be felt for a considerable
period and are being exacerbated by the currency exchange rate. Japan is heavily
dependent on foreign oil. Japan is located in a seismically active area, and
severe earthquakes may damage important elements of the country's
infrastructure. Japan's economic prospects may be affected by the political and
military situations of its near neighbors, notably North and South Korea, China
and Russia.
OTHER INVESTMENT COMPANIES (NEUBERGER BERMAN INTERNATIONAL AND NEUBERGER
BERMAN GUARDIAN PORTFOLIOS). Neuberger Berman INTERNATIONAL Portfolio may invest
in the shares of other investment companies. Such investment may be the most
practical or only manner in which the Portfolio can participate in certain
foreign markets because of the expenses involved or because other vehicles for
investing in those countries may not be available at the time the Portfolio is
ready to make an investment. Neuberger Berman GUARDIAN Portfolio at times may
invest in instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P 500.
As a shareholder in an investment company, a Portfolio would bear its pro
rata share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. Neuberger Berman INTERNATIONAL and Neuberger Berman
GUARDIAN Portfolios do not intend to invest in such funds unless, in the
judgment of NB Management, the potential benefits of such investment justify the
payment of any applicable premium or sales charge.
37
<PAGE>
POLICIES AND LIMITATIONS. Each Portfolio's investment in such securities
is limited to (i) 3% of the total voting stock of any one investment company,
(ii) 5% of the Portfolio's total assets with respect to any one investment
company and (iii) 10% of the Portfolio's total assets in the aggregate.
INDEXED SECURITIES (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). Neuberger
Berman INTERNATIONAL Portfolio may invest in indexed securities whose values are
linked to currencies, interest rates, commodities, indices, or other financial
indicators. Most indexed securities are short- to intermediate-term fixed income
securities whose values at maturity or interest rates rise or fall according to
the change in one or more specified underlying instruments. The value of indexed
securities may increase or decrease if the underlying instrument appreciates,
and they may have return characteristics similar to direct investment in the
underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself.
NEUBERGER BERMAN FOCUS PORTFOLIO - DESCRIPTION OF ECONOMIC SECTORS.
Neuberger Berman FOCUS Portfolio seeks to achieve its investment objective
by investing principally in common stocks in the following thirteen
multi-industry economic sectors, normally making at least 90% of its investments
in not more than six such sectors:
(1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production,
or sale of automobiles, automobile parts, mobile homes, or related products
("automobile industries") or design, construction, renovation, or refurbishing
of residential dwellings. The value of securities of companies in the automobile
industries is affected by, among other things, foreign competition, the level of
consumer confidence and consumer debt, and installment loan rates. The housing
construction industry may be affected by the level of consumer confidence and
consumer debt, mortgage rates, tax laws, and the inflation outlook.
(2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing
consumer goods or services, including design, processing, production, sale, or
storage of packaged, canned, bottled, or frozen foods and beverages and design,
production, or sale of home furnishings, appliances, clothing, accessories,
cosmetics, or perfumes. Certain of these companies are subject to government
regulation affecting the use of various food additives and production methods,
which could affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research,
manufacture, or sale of products or services related to the defense or aerospace
industries, including air transport; data processing or computer-related
services; communications systems; military weapons or transportation; general
aviation equipment, missiles, space launch vehicles, or spacecraft; machinery
for guidance, propulsion, or control of flight vehicles; and airborne or
ground-based equipment essential to the test, operation, or maintenance of
flight vehicles. Because these companies rely largely on U.S. (and foreign)
governmental demand for their products and services, their financial conditions
are heavily influenced by defense spending policies.
(4) ENERGY SECTOR: Companies involved in the production, transmission,
or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal,
oil shale, or solar sources of energy (but excluding public utility companies).
38
<PAGE>
Also included are companies that provide component products or services for
those activities. The value of these companies' securities varies based on the
price and supply of energy fuels and may be affected by international politics,
energy conservation, the success of exploration projects, environmental
considerations, and the tax and other regulatory policies of various
governments.
(5) FINANCIAL SERVICES SECTOR: Companies providing financial services to
consumers or industry, including commercial banks and savings and loan
associations, consumer and industrial finance companies, securities brokerage
companies, leasing companies, and insurance companies. These companies are
subject to extensive governmental regulations. Their profitability may fluctuate
significantly as a result of volatile interest rates, concerns about particular
banks and savings institutions, and general economic conditions.
(6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or
sale of products or services used in connection with the provision of health
care, including pharmaceutical companies; firms that design, manufacture, sell,
or supply medical, dental, or optical products, hardware, or services; companies
involved in biotechnology, medical diagnostic, or biochemical research and
development; and companies that operate health care facilities. Many of these
companies are subject to government regulation and potential health care
reforms, which could affect the price and availability of their products and
services. Also, products and services of these companies could quickly become
obsolete.
(7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development,
manufacture, or marketing of products, processes, or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel,
or pollution control industries, including synthetic and natural materials (for
example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or
fragrances), paper, wood products, steel, and cement. Certain of these companies
are subject to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes used by
these companies involve hazardous components, there are additional risks
associated with their production, handling, and disposal. The risk of product
obsolescence also is present.
(8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research,
development, or manufacture of products, processes, or services relating to
electrical equipment, machinery, pollution control, or construction services,
including transformers, motors, turbines, hand tools, earth-moving equipment,
and waste disposal services. The profitability of most of these companies may
fluctuate significantly in response to capital spending and general economic
conditions. As is the case for the heavy industry sector, there are risks
associated with the production, handling, and disposal of materials and
processes that involve hazardous components and the risk of product
obsolescence.
(9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design,
production, or distribution of goods or services for the media industries
(including television or radio broadcasting or manufacturing, publishing,
recordings and musical instruments, motion pictures, and photography) and the
entertainment industries (including sports arenas, amusement and theme parks,
gaming casinos, sporting goods, camping and recreational equipment, toys and
games, travel-related services, hotels and motels, and fast food and other
restaurants). Many products produced by companies in this sector - for example,
39
<PAGE>
video and electronic games - may become obsolete quickly. Additionally,
companies engaged in television and radio broadcast are subject to government
regulation.
(10) RETAILING SECTOR: Companies engaged in retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products, or
other consumer goods, including department stores, supermarkets, and retail
chains specializing in particular items such as shoes, toys, or pharmaceuticals.
The value of these companies' securities fluctuates based on consumer spending
patterns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company in this
highly competitive sector depends on its ability to predict rapidly changing
consumer tastes.
(11) TECHNOLOGY SECTOR: Companies that are expected to have or develop
products, processes, or services that will provide, or will benefit
significantly from, technological advances and improvements or future automation
trends, including semiconductors, computers and peripheral equipment, scientific
instruments, computer software, telecommunications equipment, and electronic
components, instruments, and systems. These companies are sensitive to foreign
competition and import tariffs. Also, many of their products may become obsolete
quickly.
(12) TRANSPORTATION SECTOR: Companies involved in providing
transportation of people and products, including airlines, railroads, and
trucking firms. Revenues of these companies are affected by fluctuations in fuel
prices and government regulation of fares.
(13) UTILITIES SECTOR: Companies in the public utilities industry and
companies that derive a substantial majority of their revenues through supplying
public utilities (including companies engaged in the manufacture, production,
generation, transmission, or sale of gas and electric energy) and that provide
telephone, telegraph, satellite, microwave, and other communication facilities
to the public. The gas and electric public utilities industries are subject to
various uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO - DESCRIPTION OF SOCIAL POLICY
Background Information on Socially Responsive Investing
In an era when many people are concerned about the relationship between
business and society, socially responsive investing ("SRI") is a mechanism for
assuring that investors' social values are reflected in their investment
decisions. As such, SRI is a direct descendent of the successful effort begun in
the early 1970's to encourage companies to divest their South African operations
and subscribe to the Sullivan Principles. Today, a growing number of individuals
and institutions are applying similar strategies to a broad range of problems.
Although there are many strategies available to the socially responsive
investor, including proxy activism, below-market loans to community projects,
and venture capital, the SRI strategies used by the Portfolio generally fall
into two categories:
40
<PAGE>
Avoidance Investing. Most socially responsive investors seek to avoid
holding securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.
Leadership Investing. A growing number of investors actively look for
companies with progressive programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have surprised
Adam Smith, who was, first and foremost, a moral philosopher. THE WEALTH OF
NATIONS is firmly rooted in the Enlightenment conviction that the purpose of
capital is the social good and the related belief that idle capital is both
wasteful and unethical. But, what very likely would have surprised Smith is the
sheer complexity of the social issues we face today and the diversity of our
attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
The Socially Responsive Database
Neuberger Berman, LLC ("Neuberger Berman"), the Portfolio's sub-adviser,
maintains a database of information about the social impact of the companies it
follows. NB Management uses the database to evaluate social issues after it
deems a stock acceptable from a financial standpoint for acquisition by the
Portfolio. The aim of the database is to be as comprehensive as possible, given
that much of the information concerning corporate responsibility comes from
subjective sources. Information for the database is gathered by Neuberger Berman
in many categories and then analyzed by NB Management in the following six
categories of corporate responsibility:
Workplace Diversity and Employment. NB Management looks for companies that
show leadership in areas such as employee training and promotion policies and
benefits, such as flextime, generous profit sharing, and parental leave. NB
Management looks for active programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors. As a basis for exclusion, NB Management looks for Equal
Employment Opportunity Act infractions and Occupational Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since the incident; and considers actions taken by the company since the
violation. NB Management also monitors companies' progress and attitudes toward
these issues.
Environment. A company's impact on the environment depends largely on the
industry. Therefore, NB Management examines a company's environmental record
vis-a-vis those of its peers in the industry. All companies operating in an
industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, NB Management examines their problems in
terms of severity, frequency, and elapsed time. NB Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. NB Management defines an
41
<PAGE>
environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. NB Management looks for the commitment and
active involvement of senior management in all these areas. Several major
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
Product. NB Management considers company announcements, press reports, and
public interest publications relating to the health, safety, quality, labeling,
advertising, and promotion of both consumer and industrial products. NB
Management takes note of companies with a strong commitment to quality and with
marketing practices which are ethical and consumer-friendly. NB Management pays
particular attention to companies whose products and services promote
progressive solutions to social problems.
Public Health. NB Management measures the participation of companies in
such industries and markets as alcohol, tobacco, gambling and nuclear power. NB
Management also considers the impact of products and marketing activities
related to those products on nutritional and other health concerns, both
domestically and in foreign markets.
Weapons. NB Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
Corporate Citizenship. NB Management gathers information about a company's
participation in community affairs, its policies with respect to charitable
contributions, and its support of education and the arts. NB Management looks
for companies with a focus, dealing with issues not just by making financial
contributions, but also by asking the questions: What can we do to help? What do
we have to offer? Volunteerism, high-school mentoring programs, scholarships and
grants, and in-kind donations to specific groups are just a few ways that
companies have responded to these questions.
Implementation of Social Policy
Companies deemed acceptable by NB Management from a financial standpoint
are analyzed using Neuberger Berman's database. The companies are then evaluated
by the portfolio manager to determine if the companies' policies, practices,
products, and services withstand scrutiny in the following major areas of
concern: the environment and workplace diversity and employment. Companies are
then further evaluated to determine their track record in issues and areas of
concern such as public health, weapons, product, and corporate citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
42
<PAGE>
database depend on Neuberger Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at NB Management who interpret
the information.
In applying the information in the database to stock selection for the
Portfolio, NB Management considers several factors. NB Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their occurrence. NB Management also takes into account any remedial action
which has been taken by the company relating to these infractions. NB Management
notes any quality innovations made by the company in its effort to create
positive change and looks at the company's overall approach to social issues.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
each Fund will vary, and an investment in a Fund, when redeemed, may be worth
more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
Each Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n(SUPERSCRIPT) = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results. As
of the date of this SAI, Neuberger Berman MILLENNIUM Trust had been in existence
only a very short time and had no meaningful performance history. The Funds
commenced operations in August 1993 except for Neuberger Berman SOCIALLY
RESPONSIVE Trust and Neuberger & Berman INTERNATIONAL Trust, which commenced
operations in March 1997 and June 1998, respectively. However, each Fund's
investment objective, policies, and limitations are the same as those of another
mutual fund that is a series of Neuberger Berman Equity Funds and that has a
name similar to the Fund's and invests in the same Portfolio ("Sister Fund").
Each Sister Fund had a predecessor. The following total return data is for each
Fund since its inception and, for periods prior to each Fund's inception, its
Sister Fund (which, as used herein, includes data for that Sister Fund's
predecessor). The total returns for periods prior to the Funds' inception would
have been lower had they reflected the higher fees of the Funds, as compared to
those of the Sister Funds.
Average Annual Total Returns
Fund Periods Ended 8/31/1998
One Year Five Years Ten Years Period From Inception
-------- ---------- --------- ---------------------
MANHATTAN -11.23% +9.32% +12.63% +15.83%
GENESIS -18.88% +12.37% N/A +12.56%
FOCUS -17.45% +12.25% +14.38% +11.69%
GUARDIAN -20.88% +9.76% +13.04% +12.58%
43
<PAGE>
PARTNERS -10.15% +14.05% +14.54% +17.28%
SOCIALLY -6.05% N/A N/A +13.61%
RESPONSIVE
INTERNATIONAL -5.55% N/A N/A +8.53%
Prior to January 5, 1989, the investment policies of Neuberger Berman
FOCUS Trust's Sister Fund required that at least 80% of its investments normally
be in energy-related investments; prior to November 1, 1991, those investment
policies required that at least 25% of its investments normally be in the energy
sector. Neuberger Berman FOCUS Trust may include information reflecting the
Sister Fund's performance and expenses for periods before November 1, 1991, in
its advertisements, sales literature, financial statements, and other documents
filed with the SEC and/or provided to current and prospective shareholders.
Investors should be aware that such information may not necessarily reflect the
level of performance and expenses that would have been experienced had the
Fund's current investment policies been in effect.
NB Management may from time to time waive a portion of its fees due from
any Fund or Portfolio or reimburse a Fund or Portfolio for a portion of its
expenses. Such action has the effect of increasing total return. Actual
reimbursements and waivers are described in the Prospectus and in "Investment
Management and Administration Services" below.
COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500" Composite
Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600
Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock
Index, Russell Midcap Growth Index, Dow Jones Industrial Average ("DJIA"),
Wilshire 1750 Index, Nasdaq Composite Index, Montgomery Securities Growth
Stock Index, Value Line Index, U.S. Department of Labor Consumer Price
Index ("Consumer Price Index"), College Board Annual Survey of Colleges,
Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra
Value Index, the EAFE(R) Index, the Financial Times World XUS Index, and
various other domestic, international, and global indices. The S&P 500
Index is a broad index of common stock prices, while the DJIA represents a
narrower segment of industrial companies. The S&P 600 Index includes
stocks that range in market value from $28 million to $3.2 billion, with
an average of $385 million. The S&P 400 Index measures mid-sized companies
that have an average market capitalization of $1.5 billion. The EAFE(R)
Index is an unmanaged index of common stock prices of more than 1,000
companies from Europe, Australia, and the Far East translated into U.S.
dollars. The Financial Times World XUS Index is an index of 24
international markets, excluding the U.S. market. Each assumes
reinvestment of distributions and is calculated without regard to tax
44
<PAGE>
consequences or the costs of investing. Each Portfolio may invest in
different types of securities from those included in some of the above
indices.
Neuberger Berman SOCIALLY RESPONSIVE Trust's performance may also be
compared to various socially responsive indices. These include The Domini Social
Index and the indices developed by the quantitative department of Prudential
Securities, such as that department's Large and Mid-Cap portfolio indices for
various breakdowns ("Sin" Stock Free, Cigarette-Stock Free, S&P Composite,
etc.).
Evaluations of the Funds' performance, their total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about a Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements for the
corresponding Fund. This information may include the Portfolio's portfolio
diversification by asset type or, in the case of Neuberger Berman SOCIALLY
RESPONSIVE Portfolio, by the social characteristics of companies owned.
Information used in Advertisements may include statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds that
may be employed to meet specific financial goals, such as (1) funding
retirement, (2) paying for children's education, and (3) financially supporting
aging parents.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find Neuberger Berman PARTNERS Trust, Neuberger Berman
GUARDIAN Trust or Neuberger Berman FOCUS Trust to be an attractive investment
vehicle also include parents saving to meet college costs for their children.
For instance, the cost of a college education is rapidly approaching the cost of
the average family home. Estimates of total four-year costs (tuition, room and
45
<PAGE>
board, books and other expenses) for students starting college in various years
may be included in Advertisements, based on the College Board Annual Survey of
Colleges.
Information relating to inflation and its effects on the dollar also may
be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of investing at market highs and/or
lows, and investing early versus late for retirement plans also may be included
in Advertisements, if appropriate.
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing in a diversified
portfolio of securities, diversification does not eliminate all risk. There can,
of course, be no assurance that any Portfolio will achieve its investment
objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts and Managers Trust, including their addresses and
principal business experience during the past five years. Some persons named as
trustees and officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
THE TRUSTS AND EQUITY MANAGERS TRUST:
<TABLE>
<CAPTION>
Positions Held
Name, Age, and With the Trusts and
Address(1) Equity Managers Trust Principal Occupation(s)(2)
---------- --------------------- --------------------------
<S> <C> <C>
Faith Colish (63) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street and Equity Managers Professional Corporation.
24th Floor Trust
New York, NY 10005
Stanley Egener* (64) Chairman of the Principal of Neuberger Berman;
Board, Chief President and Director of NB
Executive Officer, Management; Chairman of the Board,
and Trustee of each Chief Executive Officer and Trustee
Trust and Equity of eight other mutual funds for
Managers Trust which NB Management acts as
investment manager or administrator.
46
<PAGE>
Positions Held
Name, Age, and With the Trusts and
Address(1) Equity Managers Trust Principal Occupation(s)(2)
---------- --------------------- --------------------------
Howard A. Mileaf (61) Trustee of each Trust Vice President and Special Counsel
WHX Corporation and Equity Managers to WHX Corporation (holding company)
110 East 59th Street Trust since 1992; Director of Kevlin
30th Floor Corporation (manufacturer of
New York, NY 10022 microwave and other products).
Edward I. O'Brien* (70) Trustee of each Trust Until 1993, President of the
12 Woods Lane and Equity Managers Securities Industry Association
Scarsdale, NY 10583 Trust ("SIA") (securities industry's
representative in government
relations and regulatory matters at
the federal and state levels); until
November 1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (70) Trustee of each Trust Retired. Formerly,
7082 Siena Court and Equity Managers President of SOBRO (South Bronx
Boca Raton, FL 33433 Trust Overall Economic Development
Corporation).
John P. Rosenthal (65) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities and Equity Managers Securities Inc. (a registered
Inc. Trust broker-dealer) since 1991; Director,
Burnham Asset Management Corp. Cancer Treatment Holdings, Inc.
1325 Avenue of the
Americas
17th Floor
New York, NY 10019
Cornelius T. Ryan (67) Trustee of each Trust General Partner of Oxford Partners
Oxford Bioscience and Equity Managers and Oxford Bioscience Partners
Partners Trust (venture capital partnerships) and
315 Post Road West President of Oxford Venture
Westport, CT 06880 Corporation; Director of Capital
Cash Management Trust (money market
fund) and Prime Cash Fund.
Gustave H. Shubert (69) Trustee of each Trust Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard and Equity Managers Advisory Trustee of Rand (a
Pacific Palisades, CA 90272 Trust non-profit public interest research
institution) since 1989; Honorary
Member of the Board of Overseers of
the Institute for Civil Justice, the
Policy Advisory Committee of the
Clinical Scholars Program at the
University of California, the
American Association for the
47
<PAGE>
Positions Held
Name, Age, and With the Trusts and
Address(1) Equity Managers Trust Principal Occupation(s)(2)
---------- --------------------- --------------------------
Advancement of Science, the Counsel
on Foreign Relations, and the
Institute for Strategic Studies
(London); advisor to the Program
Evaluation and Methodology Division
of the U.S. General Accounting
Office; formerly Senior Vice
President and Trustee of Rand.
Lawrence Zicklin* (62) President and Trustee Principal of Neuberger Berman;
of each Trust and Director of NB Management; President
Equity Managers Trust and/or Trustee of five other mutual
funds for which NB Management acts
as investment manager or
administrator.
Daniel J. Sullivan (58) Vice President of Senior Vice President of NB
each Trust and Equity Management since 1992; Vice
Managers Trust President of eight other mutual
funds for which NB Management acts
as investment manager or
administrator.
Michael J. Weiner (51) Vice President and Senior Vice President of NB
Principal Financial Management since 1992;
Treasurer of Officer of each Trust NB Management
and Equity Managers from 1992 to 1996; Vice President
Trust and Principal Financial Officer
of eight other mutual funds for
which NB Management acts as
investment manager or administrator.
Claudia A. Brandon (42) Secretary of each Vice President of NB Management;
Trust and Equity Secretary of eight other mutual
Managers Trust funds for which NB Management acts
as investment manager or
administrator.
Richard Russell (51) Treasurer and Vice President of NB Management
Principal Accounting since 1993; Treasurer and Principal
Officer of each Trust Accounting Officer of eight other
and Equity Managers mutual funds for which NB Management
Trust acts as investment manager or
administrator.
48
<PAGE>
Positions Held
Name, Age, and With the Trusts and
Address(1) Equity Managers Trust Principal Occupation(s)(2)
---------- --------------------- --------------------------
Stacy Cooper-Shugrue (35) Assistant Secretary Assistant Vice President of NB
of each Trust and Management since 1993; Assistant
Equity Managers Trust Secretary of eight other mutual
funds for which NB Management acts
as investment manager or
administrator.
C. Carl Randolph(61) Assistant Secretary Principal of Neuberger Berman since
of each Trust and 1992; Assistant Secretary of eight
Equity Managers Trust other mutual funds for which NB
Management acts as
investment manager
or administrator.
Barbara DiGiorgio (39) Assistant Treasurer Assistant Vice President of NB
of each Trust and Management since 1993; Assistant
Equity Managers Trust Treasurer since 1996 of eight other
mutual funds for which NB Management
acts as investment manager or
administrator.
Celeste Wischerth (37) Assistant Treasurer Assistant Vice President of NB
of each Trust and Management since 1994; prior
Equity Managers Trust thereto, employee of NB Management;
Assistant Treasurer since 1996 of
eight other mutual funds for which
NB Management acts as investment
manager or administrator.
GLOBAL MANAGERS TRUST:
Positions Held with
Name, Age, and Global
Address(1) Managers Trust Principal Occupation(s)(2)
- ---------- -------------- --------------------------
Stanley Egener* (64) Chairman of the (See above)
Board, Chief
Executive Officer and
Trustee
Howard A. Mileaf (61) Trustee (See above)
WHX Corporation
110 East 59th Street
30th Floor
New York, NY 10022
49
<PAGE>
Positions Held with
Name, Age, and Global
Address(1) Managers Trust Principal Occupation(s)(2)
- ---------- -------------- --------------------------
John T. Patterson, Jr. (70) Trustee (See above)
7082 Siena Court
Boca Raton, FL 33433
John P. Rosenthal (65) Trustee (See above)
Burnham Securities Inc.
Burnham Asset Management Corp.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Lawrence Zicklin (62) President (See above)
Daniel J. Sullivan (58) Vice President (See above)
Michael J. Weiner (51) Vice President and (See above)
Principal Financial
Officer
Richard Russell (51) Treasurer and (See above)
Principal Accounting
Officer
Claudia A. Brandon (42) Secretary (See above)
Stacy Cooper-Shugrue (35) Assistant Secretary (See above)
C. Carl Randolph (61) Assistant Secretary (See above)
Barbara DiGiorgio (39) Assistant Treasurer (See above)
Celeste Wischerth (37) Assistant Treasurer (See above)
Jacqueline Henning (56) Assistant Treasurer Managing Director, State Street
Cayman Trust Co., Ltd. since 1994;
Assistant Director, Morgan Grenfell,
1993-94; Bank of Nova Scotia Trust
Co. (Cayman) Ltd., Managing Director,
1988-93.
Lenore Joan McCabe (37) Assistant Secretary Operations Supervisor, State Street
Cayman Trust Co., Ltd.; Project
Manager, State Street Canada, Inc.,
1992-94.
</TABLE>
50
<PAGE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person
is 605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust and
Managers Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin
are interested persons by virtue of the fact that they are officers and/or
directors of NB Management and principals of Neuberger Berman. Mr. O'Brien is an
interested person by virtue of the fact that he is a director of Legg Mason,
Inc., a wholly owned subsidiary of which, from time to time, serves as a broker
or dealer to the Portfolios and other funds for which NB Management serves as
investment manager.
The Trusts' Trust Instruments and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
The following table sets forth information concerning the compensation of
the trustees of each Trust. None of the Neuberger Berman Funds(R) has any
retirement plan for its trustees.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/98
Aggregate Aggregate Total Compensation from Investment
Compensation from Compensation from Companies in the
Neuberger Berman Neuberger Berman Neuberger Berman Fund
------------ ------------- ------------------------
Name and Position
With Each Trust
- ---------------
<S> <C> <C> <C>
Faith Colish $ ________ $______ $ _____________
Trustee (5 other investment
companies)
Stanley Egener $ ________ $________ $ ___________
Chairman of the (9 other investment
Board, Chief companies)
Executive Officer,
and Trustee
51
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/98
Aggregate Aggregate Total Compensation from Investment
Compensation from Compensation from Companies in the
Neuberger Berman Neuberger Berman Neuberger Berman Fund
------------ ------------- ------------------------
Name and Position
With Each Trust
- ---------------
Alan R. Gruber, $ __________ $________ $ ______________
Trustee, and the (3 other investment
Estate of Alan R. companies)
Gruber
Howard A. Mileaf $ __________ $_________ $ ____________
Trustee (4 other investment
companies)
Edward I. O'Brien $ _________ $___________ $ ______________
Trustee (3 other investment
companies)
John T. Patterson, $ _________ $__________ $ _____________
Jr. (4 other investment
Trustee companies)
John P. Rosenthal $ _________ $__________ $ ____________
Trustee (4 other investment
companies)
Cornelius T. Ryan $ _________ $__________ $ ____________
Trustee (3 other investment
companies)
Gustave H. Shubert $ __________ $___________ $ ____________
Trustee (3 other investment
companies)
Lawrence Zicklin $ _________ $ _________
$ __________ (5 other investment
President and companies)
Trustee
</TABLE>
At November ________,1998, the trustees and officers of the Trusts and the
corresponding Managers Trust, as a group, owned beneficially or of record less
than 1% of the outstanding shares of each Fund (except Neuberger Berman
INTERNATIONAL Trust). As of that date, the trustees and officers of the Trust
and Global Managers Trust, as a group, owned _______% of the outstanding shares
of Neuberger Berman INTERNATIONAL Trust.
52
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Funds' net investable assets are invested in their
corresponding Portfolios, the Funds do not need an investment manager. NB
Management serves as the investment manager to all the Portfolios (except
Neuberger Berman INTERNATIONAL Portfolio) pursuant to a management agreement
with Managers Trust, dated as of August 2, 1993 ("EMT Management Agreement").
The EMT Management Agreement was approved by the holders of the interests
in all the Portfolios (except Neuberger Berman SOCIALLY RESPONSIVE Portfolio) on
August 2, 1993, and by the holders of the interests in Neuberger Berman SOCIALLY
RESPONSIVE Portfolio on March 9, 1994 and in Neuberger Berman MILLENNIUM
Portfolio on _______, 1998. Neuberger Berman SOCIALLY RESPONSIVE Portfolio was
authorized to become subject to the Management Agreement by vote of the
Portfolio Trustees on October 20, 1993, and became subject to it on March 14,
1994. Neuberger Berman MILLENNIUM Portfolio was authorized to become subject to
the Management Agreement by vote of the Portfolio Trustees on _______, 1998, and
became subject to it on October 19, 1998.
NB Management serves as the investment manager to Neuberger Berman
INTERNATIONAL Portfolio pursuant to a management agreement with Global Managers
Trust, Dated as of November 1, 1995 ("GMT Management Agreement"). The GMT
Management Agreement was approved by the holders of the interests in Neuberger
Berman INTERNATIONAL Portfolio on October 26, 1995. That Portfolio was
authorized to become subject to the GMT Management Agreement by vote of the
Portfolio Trustees on August 8, 1995, and became subject to it on November 1,
1995.
The EMT Management Agreement and GMT Management Agreement ("Management
Agreements") provide, in substance, that NB Management will make and implement
investment decisions for the Portfolios in its discretion and will continuously
develop an investment program for the Portfolios' assets. The Management
Agreement permits NB Management to effect securities transactions on behalf of
each Portfolio through associated persons of NB Management. The Management
Agreement also specifically permits NB Management to compensate, through higher
commissions, brokers and dealers who provide investment research and analysis to
the Portfolios, although NB Management has no current plans to pay a material
amount of such compensation.
NB Management provides to each Portfolio, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trusts and of Managers Trust. See "Trustees and Officers." Each
Portfolio pays NB Management a management fee based on the Portfolio's average
daily net assets, as described in the Prospectus.
NB Management provides facilities, services and personnel, as well as
accounting, recordkeeping, and other services, to each Fund (except Neuberger
Berman SOCIALLY RESPONSIVE Trust) pursuant to an administration agreement with
53
<PAGE>
Equity Trust, dated August 3, 1993, as amended on August 2, 1996, and
__________, 1998 ("Equity Trust Administration Agreement"). Neuberger Berman
INTERNATIONAL Trust and Neuberger Berman MILLENNIUM Trust were authorized to
become subject to the Administration Agreement by vote of the Fund Trustees on
_______, 1998, and _______________, 1998, respectively, and became subject to it
on ________, 1998 and _______, 1998, respectively. NB Management provides
facilities, services and personnel, as well as accounting, recordkeeping, and
other services, to Neuberger Berman SOCIALLY RESPONSIVE Trust pursuant to an
administration agreement with Equity Assets, dated November 1, 1994, as amended
August 2, 1996 ("Equity Assets Administration Agreement"). The Equity Trust
Administration Agreement and the Equity Assets Administration Agreement are
referred to below as the "Administration Agreements." NB Management enters into
administrative services agreements with Institutions, pursuant to which it
compensates Institutions for accounting, recordkeeping and other services that
they provide in connection with investments in the Funds.
Institutions may be subject to federal or state laws that limit their
ability to provide certain administrative or distribution-related services. For
example, the Glass-Steagall Act is generally interpreted to prohibit most banks
from underwriting mutual fund shares. NB Management intends to contract with
Institutions for only those services they may legally provide. If, due to a
change in the laws governing Institutions or in the interpretation of any such
law, an Institution is prohibited from performing some or all of the
above-described services, NB Management may be required to find alternative
means of providing those services. Any such change is not expected to impact the
Funds or their shareholders adversely.
Because Neuberger Berman INTERNATIONAL Portfolio has its principal offices
in the Cayman Islands, Global Managers Trust has entered into an Administrative
Services Agreement with State Street Cayman Trust Company Ltd. ("State Street
Cayman"), Elizabethan Square, P.O. Box 1984, George Town, Grand Cayman, Cayman
Islands, British West Indies, effective August 31, 1994. Under the
Administrative Services Agreement, State Street Cayman provides sufficient
personnel and suitable facilities for the principal offices of Neuberger Berman
INTERNATIONAL Portfolio and provides certain administrative, fund accounting,
and transfer agency services with respect to that Portfolio. The Administrative
Services Agreement terminates if assigned by State Street Cayman; however, State
Street Cayman is permitted to, and does, employ an affiliate, State Street
Canada, Inc., to perform certain accounting functions.
Prior to November 1, 1995, Neuberger Berman INTERNATIONAL Portfolio was
advised by BNP-NB Global Asset Management, L.P. ("BNP-NB Global"), a joint
venture of Banque Nationale de Paris ("BNP") and Neuberger Berman, pursuant to
an investment advisory agreement dated June 15, 1994. During that period, BNP-NB
Global voluntarily reimbursed the Portfolio to the extent that its operating
expenses (excluding interest, taxes, brokerage commissions, and extraordinary
expenses) exceeded 0.70% per annum of the Portfolio's average daily net assets.
NB Management provided the Portfolio with administrative services pursuant to a
separate administration agreement dated June 15, 1994. Prior to November 1,
1995, NB Management provided similar services to the Fund pursuant to an
administration agreement dated June 15, 1994 and amended May 1, 1995.
54
<PAGE>
MANAGEMENT AND ADMINISTRATION FEES
For investment management services, each Portfolio (except Neuberger
Berman GENESIS Portfolio) pays NB Management a fee at the annual rate of 0.55%
of the first $250 million of that Portfolio's average daily net assets, 0.525%
of the next $250 million, 0.50% of the next $250 million, 0.475% of the next
$250 million, 0.45% of the next $500 million, and 0.425% of average daily net
assets in excess of $1.5 billion. Neuberger Berman GENESIS Portfolio and
Neuberger Berman MILLENNIUM Portfolio each pay NB Management a fee for
investment management services at the annual rate of 0.85% of the first $250
million of the Portfolio's average daily net assets, 0.80% of the next $250
million, 0.75% of the next $250 million, 0.70% of the next $250 million and
0.65% of average daily net assets in excess of $1 billion. Neuberger Berman
INTERNATIONAL Portfolio each pay NB Management a fee for investment management
services at the annual rate of 0.85% of the first $250 million of the
Portfolio's average daily net assets, 0.825% of the next $250 million, 0.775% of
the next $250 million, 0.75% of the next $250 million and 0.725% of average
daily net assets in excess of $1.5 billion.
For administrative services, each Fund pays NB Management a fee at the
annual rate of 0.40% of that Fund's average daily net assets. With a Fund's
consent NB Management may subcontract some of its responsibilities to that Fund
under the administration agreement and may compensate each Institution that
provides such services at an annual rate of up to 0.25% of the average net asset
value of Fund shares held through that Institution.
During the fiscal years ended August 31, 1998, 1997 and 1996, each Fund
accrued management and administration fees as follows:
Management and Administration Fees
Accrued for Fiscal Years
Fund Ended August 31
1998 1997 1996
---- ---- ----
MANHATTAN $525,466 $415,355 $420,605
GENESIS $8,034,410 $1,870,816 $487,514
FOCUS $1,953,132 $936,458 $329,609
GUARDIAN $19,092,633 $14,839,636 $8,821,718
INTERNATIONAL $4,582* N/A N/A
PARTNERS $6,210,071 $2,313,486 $755,623
SOCIALLY RESPONSIVE $111,257 $ 16,656** N/A
55
<PAGE>
- --------------------
*From June 29, 1998 (commencement of operations) to August 31, 1998.
**From March 3, 1997 (commencement of operations) to August 31, 1997.
WAIVERS AND REIMBURSEMENTS
From May 1, 1995 to December 14 1997, NB Management voluntarily waived a
portion of the management fee borne by Neuberger Berman GENESIS Portfolio to
reduce the fee by 0.10% per annum of the average daily net assets of that
Portfolio.
Portion of Management Fee Waived
Fund for Fiscal Years Ended August 31
9/1/97-12/14/97 1997 1996
---- ----
GENESIS $157,077 $153,513 $39,014
NB Management has voluntarily undertaken to reimburse each Fund for its
total operating expenses so that each Fund's expense ratio per annum will not
exceed the expense ratio of its Sister Fund by more than 0.10% of the Fund's
average daily net assets, but in the case of Neuberger Berman International
Trust not to exceed 1.70%. Each undertaking can be terminated by NB Management
by giving a Fund at least 60 days' prior written notice.
Amount of Total Operating Expenses
Reimbursed by NB Management
Fund for Fiscal Years Ended August 31
1998 1997 1996
---- ---- ----
MANHATTAN $59,281 $64,448 $78,810
GENESIS $0 $0 $66,139
FOCUS $67,257 $102,407 $104,689
GUARDIAN $0 $0 $69,266
INTERNATIONAL $15,821* N/A N/A
PARTNERS $45,387 $89,923 $109,574
SOCIALLY RESPONSIVE $100,537 $30,470* N/A
56
<PAGE>
- --------------------
*From June 29, 1998 (commencement of operations) to August 31, 1998.
**From commencement of operations (March 3, 1997) to August 31, 1997.
N&B Management has voluntarily undertaken to reimburse the Fund for its
total operating expenses which exceed 1.75% of the Fund's average daily net
assets. The Fund has in turn agreed to repay N&B Management through December 31,
2000, for the excess Total Operating Expenses that N&B Management reimbursed to
the Fund through December 31, 1999, so long as the Fund's Total Operating
Expenses do not exceed the above expense limitation. This undertaking can be
terminated by N&B Management by giving the Fund at least 60 days' prior written
notice.
The Management Agreement continues until August 2, 1999. The Management
Agreement is renewable thereafter from year to year with respect to each
Portfolio, so long as its continuance is approved at least annually (1) by the
vote of a majority of the Portfolio Trustees who are not "interested persons" of
NB Management or Managers Trust ("Independent Portfolio Trustees"), cast in
person at a meeting called for the purpose of voting on such approval, and (2)
by the vote of a majority of the Portfolio Trustees or by a 1940 Act majority
vote of the outstanding interests in that Portfolio. The Administration
Agreements continue until August 2, 1999. The Administration Agreements are
renewable from year to year with respect to a Fund, so long as their continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of NB Management or the respective Trust
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding shares in that
Fund.
The Management Agreement is terminable, without penalty, with respect to a
Portfolio on 60 days' written notice either by Managers Trust or by NB
Management. The Administration Agreements are terminable, without penalty, with
respect to a Fund on 60 days' written notice either by NB Management or by the
respective Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser with respect to each Portfolio (except Neuberger
Berman INTERNATIONAL Portfolio) pursuant to a sub-advisory agreement dated
August 2, 1993 ("EMT Sub-Advisory Agreement").
The EMT Sub-Advisory Agreement was approved by the holders of the
interests in the Portfolios (except Neuberger Berman MILLENNIUM and SOCIALLY
RESPONSIVE Portfolios) on August 2, 1993, and by the holders of the interests in
Neuberger Berman SOCIALLY RESPONSIVE Portfolio on March 9, 1994, and Neuberger
Berman MILLENNIUM Portfolio on ______________, 1998. Neuberger Berman SOCIALLY
RESPONSIVE Portfolio was authorized to become subject to the Sub-Advisory
Agreement by vote of the Portfolio Trustees on October 20, 1993, and became
subject to it on March 14, 1994. Neuberger Berman MILLENNIUM Portfolio was
57
<PAGE>
authorized to become subject to the Sub-Advisory Agreement by vote of the
Portfolio Trustees on ________, 1998, and became subject to it on _________,
1998.
NB Management retains Neuberger Berman as sub-advisor with respect to
Neuberger Berman INTERNATIONAL Portfolio pursuant to a sub-advisory agreement
dated November 1, 1995 ("GMT Sub-Advisory Agreement"). The GMT Sub-Advisory
Agreement was approved by the holders of the interests in Neuberger Berman
INTERNATIONAL Portfolio on October 26, 1995. That Portfolio was authorized to
become subject to the GMT Sub-Advisory Agreement by vote of the Portfolio
Trustees on August 8, 1995, and became subject to it on November 1, 1995.
The EMT Sub-Advisory Agreement and GMT Sub-Advisory Agreement provide in
substance that Neuberger Berman will furnish to NB Management, upon reasonable
request, the same type of investment recommendations and research that Neuberger
Berman, from time to time, provides to its principals and employees for use in
managing client accounts. In this manner, NB Management expects to have
available to it, in addition to research from other professional sources, the
capability of the research staff of Neuberger Berman. This staff consists of
numerous investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with NB Management. The Sub-Advisory Agreement
provides that NB Management will pay for the services rendered by Neuberger
Berman based on the direct and indirect costs to Neuberger Berman in connection
with those services. Neuberger Berman also serves as sub-adviser for all of the
other mutual funds managed by NB Management.
The Sub-Advisory Agreements continue until August 2, 1999 and are
renewable from year to year, subject to approval of their continuance in the
same manner as the Management Agreement. The Sub-Advisory Agreements are subject
to termination, without penalty, with respect to each Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in that
Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor more
than 60 days' written notice. A Sub-Advisory Agreement also terminates
automatically with respect to each Portfolio if it is assigned or if the
Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger Berman organization have at
least fifteen years experience. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
As of September 30, 1998, the investment companies managed by NB
Management had aggregate net assets of approximately $18.5 billion. NB
Management currently serves as investment manager of the following investment
companies:
58
<PAGE>
Approximate Net
Assets at
September 30,
NAME 1998
---- ---------------
Neuberger Berman Cash Reserves $961,277,115
Portfolio
(investment portfolio for
Neuberger Berman Cash Reserves)
Neuberger Berman Government Money $356,413,873
Portfolio
(investment portfolio for
Neuberger Berman Government
Money Fund)
Neuberger Berman High Yield Bond $22,692,273
Portfolio
(investment portfolio for
Neuberger Berman High Yield Bond
Fund)
Neuberger Berman Limited Maturity Bond $357,429,917
Portfolio
(investment portfolio for
Neuberger Berman Limited
Maturity Bond Fund and Neuberger
Berman Limited Maturity Bond
Trust)
Neuberger Berman Municipal Securities $ 38,147,017
Portfolio
(investment portfolio for
Neuberger Berman Municipal
Securities Trust)
Neuberger Berman Municipal Money $ 215,897,411
Portfolio
(investment portfolio for
Neuberger Berman Municipal Money
Fund)
Neuberger Berman FOCUS Portfolio $1,296,356,136
(investment portfolio for
Neuberger Berman FOCUS Fund,
Neuberger Berman FOCUS Trust and
Neuberger Berman FOCUS Assets)
Neuberger Berman GENESIS Portfolio $1,931,169,593
(investment portfolio for
Neuberger Berman GENESIS Fund,
Neuberger Berman GENESIS Trust
and Neuberger Berman GENESIS
Assets)
Neuberger Berman GUARDIAN Portfolio $5,672,663,013
(investment portfolio for
Neuberger Berman GUARDIAN Fund,
59
<PAGE>
Approximate Net
Assets at
September 30,
NAME 1998
---- ---------------
Neuberger Berman GUARDIAN Trust
and Neuberger Berman GUARDIAN
Assets)
Neuberger Berman INTERNATIONAL $114,793,906
Portfolio
(investment portfolio for
Neuberger Berman INTERNATIONAL
Fund and Neuberger Berman
INTERNATIONAL Trust)
Neuberger Berman MANHATTAN Portfolio $555,345,009
(investment portfolio for
Neuberger Berman MANHATTAN
Fund, Neuberger Berman MANHATTAN
Trust and Neuberger Berman
MANHATTAN Assets)
Neuberger Berman PARTNERS Portfolio $3,712,575,595
(investment portfolio for
Neuberger Berman PARTNERS Fund,
Neuberger Berman PARTNERS Trust
and Neuberger Berman PARTNERS
Assets)
Neuberger Berman SOCIALLY RESPONSIVE $300,343,681
Portfolio
(investment portfolio for
Neuberger Berman SOCIALLY
RESPONSIVE Fund, Neuberger
Berman SOCIALLY RESPONSIVE Trust
and Neuberger Berman NYCDC
SOCIALLY RESPONSIVE Trust)
Advisers Managers Trust $2,504,652,561
(seven series)
The investment decisions concerning the Portfolios and the other mutual
funds managed by NB Management (collectively, "Other NB Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolios.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolios to achieve their objectives may differ.
The investment results achieved by all of the mutual funds managed by NB
Management have varied from one another in the past and are likely to vary in
the future.
60
<PAGE>
There may be occasions when a Portfolio and one or more of the Other NB
Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolios are subject to certain limitations imposed on all advisory
clients of Neuberger Berman (including the Portfolios, the Other NB Funds, and
other managed accounts) and personnel of Neuberger Berman and its affiliates.
These include, for example, limits that may be imposed in certain industries or
by certain companies, and policies of Neuberger Berman that limit the aggregate
purchases, by all accounts under management, of the outstanding shares of public
companies.
MANAGEMENT AND CONTROL OF NB MANAGEMENT
The directors and officers of NB Management, all of whom have offices at
the same address as NB Management, are Richard A. Cantor, Chairman of the Board
and director; Stanley Egener, President and director; Theodore P. Giuliano, Vice
President and director; Michael M. Kassen, Vice President and director; Irwin
Lainoff, director; Lawrence Zicklin, director; Daniel J. Sullivan, Senior Vice
President; Peter E. Sundman, Senior Vice President; Michael J. Weiner, Senior
Vice President; Claudia A. Brandon, Vice President; Patrick T. Byrne, Vice
President; Brooke A. Cobb, Vice President; Robert W. D'Alelio, Vice President;
Roberta D'Orio, Vice President; Clara Del Villar, Vice President; Brian J.
Gaffney, Vice President; Joseph G. Galli, Vice President; Robert I. Gendelman,
Vice President; Josephine P. Mahaney, Vice President; Michael F. Malouf, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; S. Basu Mullick, Vice President; Janet W. Prindle, Vice President;
Kevin L. Risen, Vice President; Richard Russell, Vice President; Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President; Frederic B. Soule, Vice
President; Judith M. Vale, Vice President; Susan Walsh, Vice President; Allan R.
White III, Vice President; Thomas Wolfe, Vice President; Andrea Trachtenberg,
Vice President of Marketing; Robert Conti, Treasurer; Ramesh Babu, Assistant
Vice President; Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Michael
J. Hanratty, Assistant Vice President; Leslie Holliday-Soto, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; and Loraine Olavarria, Assistant
Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale are principals of
Neuberger Berman.
Mr. Egener is a trustee and officer of the Trusts and the Managers
Trusts. Mr. Zicklin is a trustee of the Trusts and Equity Managers Trust and
an officer of the Trusts and the Managers Trusts. Messrs. Russell, Sullivan
61
<PAGE>
and Weiner and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and Wischerth are
officers, of the Trusts and Managers Trusts. C. Carl Randolph, a principal
of Neuberger Berman, also is an officer of the Trusts and Managers Trusts.
All of the outstanding voting stock in NB Management is owned by persons
who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in connection with
the offering of each Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, each Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Funds' shares.
From time to time, NB Management may enter into arrangements pursuant to
which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trusts, on behalf of their respective Funds, and the Distributor are
parties to Distribution Agreements that continue until August 2, 1999. The
Distribution Agreements may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreements may be terminated by either party and will
terminate automatically on their assignment, in the same manner as the
Management Agreement.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
Each Fund's shares are bought or sold at a price that is the Fund's NAV
per share. The NAVs for each Fund and its corresponding Portfolio are calculated
by subtracting liabilities from total assets (in the case of a Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of a Fund, its percentage interest in its corresponding Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). Each Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. Each Fund and its
corresponding Portfolio calculate their NAVs as of the close of regular trading
on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open.
62
<PAGE>
Each Portfolio (except Neuberger Berman INTERNATIONAL Portfolio) values
securities (including options) listed on the NYSE, the American Stock Exchange
or other national securities exchanges or quoted on Nasdaq, and other securities
for which market quotations are readily available, at the last reported sale
price on the day the securities are being valued. If there is no reported sale
of such a security on that day, the security is valued at the mean between its
closing bid and asked prices on that day. These Portfolios value all other
securities and assets, including restricted securities, by a method that the
trustees of Equity Managers Trust believe accurately reflects fair value.
Neuberger Berman INTERNATIONAL Portfolio values equity securities at the
last reported sale price on the principal exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
regular trading on the NYSE on the day the securities are being valued or, if
there are no sales, at the last available bid price on that day. Debt
obligations are valued at the last available bid price for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality, and type. Foreign securities are translated from the local
currency into U.S. dollars using current exchange rates. The Portfolio values
all other types of securities and assets, including restricted securities and
securities for which market quotations are not readily available, by a method
that the trustees of Global Managers Trust believe accurately reflects fair
value.
Neuberger Berman INTERNATIONAL Portfolio's portfolio securities are traded
primarily in foreign markets which may be open on days when the NYSE is closed.
As a result, the NAV of Neuberger Berman INTERNATIONAL Trust may be
significantly affected on days when shareholders have no access to that Fund.
If NB Management believes that the price of a security obtained under a
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of the corresponding Managers Trust believe accurately reflects fair
value.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Maintaining Your Account," an Institution may exchange shares of any Fund for
shares of one or more of the other Funds or the income fund that is briefly
described below ("Income Fund"), if made available through that Institution.
INCOME FUND
Neuberger Berman Seeks the highest current income consistent
Limited Maturity Bond Trust with low risk to principal and liquidity and,
secondarily, total return. The corresponding
portfolio invests in debt securities, primarily
investment grade; maximum 10% below investment
63
<PAGE>
grade, but no lower than B.*/ Maximum average
duration of four years.
Any Fund described herein, and the Income Fund, may terminate or modify
its exchange privilege in the future.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed, (2) when trading on the
NYSE is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for its corresponding Portfolio to dispose of securities
it owns or fairly to determine the value of its net assets, or (4) for such
other period as the SEC may by order permit for the protection of the Fund's
shareholders. Applicable SEC rules and regulations shall govern whether the
conditions prescribed in (2) or (3) exist. If the right of redemption is
suspended, shareholders may withdraw their offers of redemption, or they will
receive payment at the NAV per share in effect at the close of business on the
first day the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
Each Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" above. If payment is made in
securities, an Institution generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Funds do not redeem in kind under normal circumstances, but would do so when the
Fund Trustees determined that it was in the best interests of a Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders substantially all of its share
of any net investment income (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
- ------------------------
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by NB Management to be of comparable quality.
64
<PAGE>
currency transactions earned or realized by its corresponding Portfolio. A
Portfolio's net investment income consists of all income accrued on portfolio
assets less accrued expenses, but does not include capital and foreign currency
gains and losses. Net investment income and realized gains and losses are
reflected in a Portfolio's NAV (and, hence, its corresponding Fund's NAV) until
they are distributed. Each Fund calculates its net investment income and NAV per
share as of the close of regular trading on the NYSE on each Business Day
(usually 4:00 p.m. Eastern time).
Dividends from net investment income and distributions of net realized
capital and foreign currency gains, if any, normally are paid once annually, in
December, except that Neuberger Berman GUARDIAN Trust distributes substantially
all of its share of Neuberger Berman GUARDIAN Portfolio's net investment income
(after deducting expenses incurred directly by Neuberger Berman GUARDIAN Trust),
if any, near the end of each other calendar quarter.
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the Institution elects to
receive them in cash ("cash election"). To the extent dividends and other
distributions are subject to federal, state, or local income taxation, they are
taxable to the shareholders whether received in cash or reinvested in Fund
shares. A cash election with respect to any Fund remains in effect until the
Institution notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS
In order to continue to qualify for treatment as a RIC under the Code,
each Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from Financial Instruments) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); and(2) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs, and other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting securities,
and (ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer.
Certain funds that invest in portfolios managed by NB Management,
including most of the Sister Funds have received rulings from the Internal
Revenue Service ("Service") that each such fund, as an investor in its
corresponding portfolio, will be deemed to own a proportionate share of the
65
<PAGE>
portfolio's assets and income for purposes of determining whether the fund
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied on as precedent by the Funds, NB Management
believes that the reasoning thereof and, hence, their conclusion apply to the
Funds as well.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the Funds
of distributions to them from the Portfolios, investments by the Portfolios in
certain securities, and hedging transactions engaged in by the Portfolios.
TAXATION OF THE PORTFOLIOS
The Portfolios (except Neuberger Berman MILLENNIUM, SOCIALLY RESPONSIVE
Portfolios and Neuberger Berman INTERNATIONAL Portfolio) have received rulings
from the Service to the effect that, among other things, each such Portfolio
will be treated as a separate partnership for federal income tax purposes and
will not be a "publicly traded partnership." Although these rulings may not be
relied on as precedent by Neuberger Berman MILLENNIUM, Neuberger Berman SOCIALLY
RESPONSIVE, and Neuberger Berman INTERNATIONAL Portfolios, NB Management
believes the reasoning thereof and, hence, their conclusion apply to that
Portfolio as well. As a result, no Portfolio is subject to federal income tax;
instead, each investor in a Portfolio, such as a Fund, is required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard to
whether it has received any cash distributions from the Portfolio. Each
Portfolio also is not subject to Delaware or New York income or franchise tax.
Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund satisfies the requirements to qualify as a RIC, each Portfolio intends
to continue to conduct its operations so that its corresponding Fund will be
able to continue to satisfy all those requirements.
Distributions to a Fund from its corresponding Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. A Fund's basis for its interest in its corresponding
Portfolio generally equals the amount of cash the Fund invests in the Portfolio,
increased by the Fund's share of the Portfolio's net income and capital gains
and decreased by (1) the amount of cash and the basis of any property the
Portfolio distributes to the Fund and (2) the Fund's share of the Portfolio's
losses.
66
<PAGE>
Dividends and interest received by a Portfolio, and gains realized by a
Portfolio, may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions ("foreign taxes") that would reduce the
yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
If more than 50% of the value of Neuberger Berman INTERNATIONAL Trust's
total assets (taking into account its share of Neuberger Berman INTERNATIONAL
Portfolio's total assets) at the close of its taxable year consists of
securities of foreign corporations, that Fund will be eligible to, and may, file
an election with the Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to the Fund's share
of any foreign taxes paid by the Portfolio ("Fund's foreign taxes"). Pursuant to
the election, Neuberger Berman INTERNATIONAL Trust would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by the shareholder, his or her share
of those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents its share of the Portfolio's income from
foreign or U.S. possessions sources as his or her own income from those sources,
and (3) either deduct the taxes deemed paid by him or her in computing his or
her taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against his or her federal income tax.
Neuberger Berman INTERNATIONAL Trust will report to its shareholders shortly
after each taxable year their respective shares of the Fund's foreign taxes and
income (taking into account its share of the Portfolio's income) from sources
within foreign countries and U.S. possessions if it makes this election.
Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"), beginning in 1998
individual shareholders of the Fund who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Forms 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.
A Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which a Portfolio is a U.S. shareholder (effective for
the taxable year beginning September 1, 1998) -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, if a Portfolio holds stock of a
PFIC, its corresponding Fund (indirectly through its interest in the Portfolio)
will be subject to federal income tax on its share of a portion of any "excess
distribution" received by the Portfolio on the stock or of any gain on the
Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
67
<PAGE>
If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of its corresponding Fund's
incurring the foregoing tax and interest obligation, the Fund would be required
to include in income each year its share of the Portfolio's pro rata share of
the QEF's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any
PFIC may elect to include in ordinary income each taxable year the excess, if
any, of the fair market value of the stock over the adjusted basis therein as of
the end of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also would be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election would be adjusted to reflect
the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolios' use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses the Portfolios
realize in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from Financial Instruments derived by the Portfolio with respect to
its business of investing in securities or foreign currencies, will qualify as
permissible income for its corresponding Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts and listed
options thereon ("Section 1256 contracts") are required to be marked to market
(that is, treated as having been sold at market value) for federal income tax
purposes at the end of a Portfolio's taxable year. Sixty percent of any net gain
or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.
Each of Neuberger Berman PARTNERS and Neuberger Berman SOCIALLY RESPONSIVE
Portfolios may acquire zero coupon securities or other securities issued with
original issue discount ("OID"). As a holder of those securities, each such
Portfolio (and, through it, its corresponding Fund) must take into income the
OID that accrues on the securities during the taxable year, even if it receives
no corresponding payment on the securities during the year. Because each such
Fund annually must distribute substantially all of its investment company
taxable income (including its share of its corresponding Portfolio's accrued
68
<PAGE>
OID) to satisfy the Distribution Requirement and avoid imposition of the Excise
Tax, the Fund may be required in a particular year to distribute as a dividend
an amount that is greater than its share of the total amount of cash its
corresponding Portfolio actually receives. Those distributions will be made from
a Fund's (or its share of its corresponding Portfolio's) cash assets or, if
necessary, from the proceeds of sales of that Portfolio's securities. A
Portfolio may realize capital gains or losses from those sales, which would
increase or decrease its corresponding Fund's investment company taxable income
and/or net capital gain.
TAXATION OF THE FUNDS' SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as principal broker for each Portfolio (except
Neuberger Berman INTERNATIONAL Portfolio) in the purchase and sale of its
portfolio securities (other than certain securities traded on the OTC market)
and in connection with the purchase and sale of options on its securities.
Neuberger Berman may act as broker for Neuberger Berman INTERNATIONAL Portfolio.
A substantial portion of the portfolio transactions of Neuberger Berman GENESIS
Portfolio involves securities traded on the OTC market; that Portfolio purchases
and sells OTC securities in principal transactions with dealers who are the
principal market makers for such securities.
During the fiscal year ended August 31, 1996, Neuberger Berman Manhattan
Portfolio paid brokerage commissions of $940,324, of which $543,020 was paid to
Neuberger Berman. During the fiscal year ended August 31, 1997, Neuberger Berman
MANHATTAN Portfolio paid brokerage commissions of $971,026, of which $458,679
was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman Manhattan
Portfolio paid brokerage commissions of $1,132,309, of which $546,227 was paid
to Neuberger Berman. Transactions in which that Portfolio used Neuberger Berman
as broker comprised 49.84% of the aggregate dollar amount of transactions
involving the payment of commissions, and 48.24% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
93.86% of the $586,082 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
$294,246,432) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its "regular brokers or dealers" (as defined in
the 1940 Act) ("Regular B/Ds"): General Electric Capital Corp. and State Street
Bank and Trust Company; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: Bear, Stearns & Co. Inc.,
$4,007,719; General Electric Capital Corp., $25,690,000; and State Street Bank &
Trust Company, $7,668,806.
During the fiscal year ended August 31, 1996, Neuberger Berman GENESIS
Portfolio paid brokerage commissions of $206,150, of which $95,999 was paid to
69
<PAGE>
Neuberger Berman. During the fiscal year ended August 31, 1997, Neuberger Berman
GENESIS Portfolio paid brokerage commissions of $860,097, of which $516,040 was
paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman GENESIS
Portfolio paid brokerage commissions of $2,419,159, of which $1,159,143 was paid
to Neuberger Berman. Transactions in which that Portfolio used Neuberger Berman
as broker comprised 51.15% of the aggregate dollar amount of transactions
involving the payment of commissions, and 47.92% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
96.67% of the $1,260,016 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
$606,971,828) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
and State Street Bank and Trust Company; at that date, that Portfolio held the
securities of its Regular B/Ds with an aggregate value as follows: General
Electric Capital Corp., $81,900,000.
During the fiscal year ended August 31, 1996, Neuberger Berman FOCUS
Portfolio paid brokerage commissions of $1,165,851, of which $583,212 was paid
to Neuberger Berman. During the fiscal year ended August 31, 1997, Neuberger
Berman FOCUS Portfolio paid brokerage commissions of $1,825,493, of which
$920,202 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman FOCUS
Portfolio paid brokerage commissions of $2,051,007, of which $998,930 was paid
to Neuberger Berman. Transactions in which that Portfolio used Neuberger Berman
as broker comprised 53.00% of the aggregate dollar amount of transactions
involving the payment of commissions, and 48.70% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
91.18% of the $1,052,078 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
$614,844,475) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley Dean Witter & Co.,
and State Street Bank and Trust Company; at that date, that Portfolio held the
securities of its Regular B/Ds with an aggregate value as follows: General
Electric Capital Corp., $18,290,000; Merrill Lynch, Pierce, Fenner & Smith Inc.,
$48,840,000; and Morgan Stanley Dean Witter & Co., $47,843,500.
During the fiscal year ended August 31, 1996, Neuberger Berman GUARDIAN
Portfolio paid brokerage commissions of $6,886,590, of which $3,542,127 was paid
to Neuberger Berman. During the fiscal year ended August 31, 1997, Neuberger
Berman GUARDIAN Portfolio paid brokerage commissions of $8,540,335, of which
$4,806,913 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman GUARDIAN
Portfolio paid brokerage commissions of $11,558,523, of which $5,733,976 was
paid to Neuberger Berman. Transactions in which that Portfolio used Neuberger
Berman as broker comprised 50.25% of the aggregate dollar amount of transactions
involving the payment of commissions, and 49.61% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
86.84% of the $5,824,547 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
70
<PAGE>
$3,766,183,233); was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley Dean Witter & Co.,
and State Street Bank and Trust Company; at that date, that Portfolio held the
securities of its Regular B/Ds with an aggregate value as follows: General
Electric Capital Corp., $256,260,000; Merrill, Lynch, Pierce, Fenner & Smith
Inc., $156,750,000; and Morgan Stanley Dean Witter & Co., $174,448,781.
During the fiscal year ended August 31, 1996, Neuberger Berman PARTNERS
Portfolio paid brokerage commissions of $4,697,854, of which $2,741,666 was paid
to Neuberger Berman. During the fiscal year ended August 31, 1997, Neuberger
Berman PARTNERS Portfolio paid brokerage commissions of $5,413,453, of which
$3,508,790 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman PARTNERS
Portfolio paid brokerage commissions of $10,028,713, of which $6,281,978 was
paid to Neuberger Berman. Transactions in which that Portfolio used Neuberger
Berman as broker comprised 65.29% of the aggregate dollar amount of transactions
involving the payment of commissions, and 62.64% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
88.75% of the $3,746,735 paid to other brokers by that Portfolio during that
fiscal year representing commissions on transactions involving approximately
$2,396,070,557) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
and State Street Bank and Trust Company; at that date, that Portfolio held
securities of its Regular B/Ds with an aggregate value as follows: General
Electric Capital Corp., $145,390,000.
During the fiscal year ended August 31, 1996, Neuberger Berman SOCIALLY
RESPONSIVE Portfolio paid brokerage commissions of $208,834, of which $124,879
was paid to Neuberger Berman. During the fiscal year ended August 31, 1997,
Neuberger Berman SOCIALLY RESPONSIVE Portfolio paid brokerage commissions of
$305,640, of which $232,238 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman SOCIALLY
RESPONSIVE Portfolio paid brokerage commissions of $401,601, of which $296,363
was paid to Neuberger Berman. Transactions in which that Portfolio used
Neuberger Berman as broker comprised 76.50% of the aggregate dollar amount of
transactions involving the payment of commissions, and 73.79% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1998. 98.95% of the $105,248 paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $59,563,090) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, that
Portfolio acquired securities of the following of its Regular B/Ds: State Street
Bank and Trust Company; at that date, that Portfolio held none of the securities
of its Regular B/Ds.
During the fiscal year ended August 31, 1996, Neuberger Berman
INTERNATIONAL Portfolio paid brokerage commissions of $183,335, of which $5,485
was paid to Neuberger Berman and $0 was paid to BNP-International Financial
Services Corporation. During the fiscal year ended August 31, 1997 Neuberger
Berman INTERNATIONAL Portfolio paid brokerage commissions of $297,431, of which
$5,901 was paid to Neuberger Berman.
71
<PAGE>
During the fiscal year ended August 31, 1998, Neuberger Berman
INTERNATIONAL Portfolio paid brokerage commissions of $345,192, of which $3,435
was paid to Neuberger Berman. Transactions in which the Portfolio used Neuberger
Berman as broker comprised 3.18% of the aggregate dollar amount of transactions
involving the payment of commissions, and 1.00% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
Of the $341,757 paid to other brokers by that Portfolio during that fiscal year,
90.27% (representing commissions on transactions involving approximately
$87,424,647) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: ABN Amro Inc., General Electric
Capital Corp., and State Street Bank and Trust Company; at that date, that
Portfolio held the securities of its Regular B/Ds with an aggregate value as
follows: ABN Amro Inc., $1,133,644.
Insofar as portfolio transactions of Neuberger Berman PARTNERS Portfolio
result from active management of equity securities, and insofar as portfolio
transactions of Neuberger Berman MANHATTAN Portfolio result from seeking capital
appreciation by selling securities whenever sales are deemed advisable without
regard to the length of time the securities may have been held, it may be
expected that the aggregate brokerage commissions paid by those Portfolios to
brokers (including Neuberger Berman where it acts in that capacity) may be
greater than if securities were selected solely on a long-term basis.
Prior to June 15, 1998, portfolio securities were, from time to time,
loaned by a Portfolio to Neuberger Berman in accordance with the terms and
conditions of an order issued by the SEC. The order exempts such transactions
from provisions of the 1940 Act that would otherwise prohibit such transactions,
subject to certain conditions.
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to securities loans by the Portfolios.
The following information reflects interest income earned by the Portfolios from
the cash collateralization of securities loans during the fiscal years ended
1998, 1997, and 1996. As reflected below, Neuberger Berman received a portion of
the interest income from the cash collateral.
<TABLE>
<CAPTION>
Interest Income from
Collateralization of Amount Paid to
Name of Portfolio Fiscal Year End Securities Loans Neuberger Berman
- ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
Neuberger Berman 8/31/98 $469,745 $ 212,611
MANHATTAN Portfolio 8/31/97 $ 988,931 $ 326,403
8/31/96 $ 301,788 $ 186,163
- -----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 285,737 $ 152,375
GENESIS Portfolio 8/31/97 $ 168,552 $ 69,948
8/31/96 $ 0 $ 0
- -----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 1,355,093 $1,035,708
GUARDIAN Portfolio 8/31/97 $4,005,765 $3,523,486
8/31/96 $2,427,096 $2,129,341
- -----------------------------------------------------------------------------------------
72
<PAGE>
Neuberger Berman 8/31/98 $ 139,877 $ 101,879
FOCUS Portfolio 8/31/97 $1,053,272 $ 898,127
8/31/96 $ 368,663 $ 330,001
- -----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 280,193 $ 141,707
PARTNERS Portfolio 8/31/97 $ 797,133 $ 688,624
8/31/96 $ 173,908 $ 118,041
- -----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 20,023 $ 10,803
SOCIALLY RESPONSIVE 8/31/97 $ 80,484 $ 51,639
Portfolio 8/31/96 $ 0 $ 0
- -----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 31,250* $ 0
INTERNATIONAL Portfolio 8/31/97 $ 0 $ 0
8/31/96 $ 0 $ 0
</TABLE>
*From June 29, 1998 (commencement of operations) to August 31, 1998.
In effecting securities transactions, each Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. Each
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolios'
knowledge, no affiliate of any Portfolio receives give-ups or reciprocal
business in connection with their securities transactions.
The use of Neuberger Berman as a broker for each Portfolio is subject to
the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Portfolio to Neuberger Berman in
connection with a purchase or sale of securities on a securities exchange may
not exceed the usual and customary broker's commission. Accordingly, it is each
Portfolio's policy that the commissions paid to Neuberger Berman must, in NB
Management's judgment, be (1) at least as favorable as those charged by other
brokers having comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger Berman on comparable
transactions for its most favored unaffiliated customers, except for accounts
for which Neuberger Berman acts as a clearing broker for another brokerage firm
and customers of Neuberger Berman considered by a majority of the Independent
73
<PAGE>
Portfolio Trustees not to be comparable to the Portfolio. The Portfolios do not
deem it practicable and in their best interests to solicit competitive bids for
commissions on each transaction effected by Neuberger Berman. However,
consideration regularly is given to information concerning the prevailing level
of commissions charged by other brokers on comparable transactions during
comparable periods of time. The 1940 Act generally prohibits Neuberger Berman
from acting as principal in the purchase of portfolio securities from, or the
sale of portfolio securities to, a Portfolio unless an appropriate exemption is
available.
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to the commissions charged by Neuberger
Berman to the Portfolios and to its other customers and information concerning
the prevailing level of commissions charged by other brokers having comparable
execution capability. In addition, the procedures pursuant to which Neuberger
Berman effects brokerage transactions for the Portfolios must be reviewed and
approved no less often than annually by a majority of the Independent Portfolio
Trustees.
To ensure that accounts of all investment clients, including a Portfolio,
are treated fairly in the event that Neuberger Berman receives transaction
instructions regarding a security for more than one investment account at or
about the same time, Neuberger Berman may combine orders placed on behalf of
clients, including advisory accounts in which affiliated persons have an
investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
Each Portfolio expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of NB Management and principals of
Neuberger Berman who are portfolio managers of some of the Portfolios and Other
NB Funds (collectively, "NB Funds") and some of Neuberger Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
74
<PAGE>
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be higher
than the amount another firm might charge if NB Management determines in good
faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolios by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolios' benefit.
Kent C. Simons and Kevin L. Risen; Judith M. Vale and Robert W. D'Alelio;
Valerie Chang; Jennifer K. Silver and Brooke A. Cobb; Michael F. Malouf and
Jennifer K. Silver; Michael M. Kassen and Robert I. Gendelman; and Janet W.
Prindle, each of whom is a Vice President of NB Management (except for Ms. Chang
who is an Assistant Vice President) and a principal of Neuberger Berman (except
for Mr. D'Alelio, Mr. Cobb and Ms. Chang), are the persons primarily responsible
for making decisions as to specific action to be taken with respect to the
investment portfolios of Neuberger Berman FOCUS and Neuberger Berman GUARDIAN,
Neuberger Berman GENESIS , Neuberger Berman INTERNATIONAL, Neuberger Berman
MANHATTAN, Neuberger Berman MILLENNIUM, Neuberger Berman PARTNERS, and Neuberger
Berman SOCIALLY RESPONSIVE Portfolios, respectively. Each of them has full
authority to take action with respect to portfolio transactions and may or may
not consult with other personnel of NB Management prior to taking such action.
If Ms. Prindle is unavailable to perform her responsibilities, Robert Ladd
and/or Ingrid Saukaitis, each of whom is an Assistant Vice President of NB
Management, will assume responsibility for the portfolio of Neuberger Berman
SOCIALLY RESPONSIVE Portfolio.
PORTFOLIO TURNOVER
A Portfolio's portfolio turnover rate is calculated by dividing (1) the
lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors or independent accountants for the Fund and its corresponding
Portfolio. Each Fund's statements show the investments owned by its
75
<PAGE>
corresponding Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in its corresponding Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
The Funds
Each Fund (except Neuberger Berman SOCIALLY RESPONSIVE Trust) is a
separate ongoing series of Equity Trust, a Delaware business trust organized
pursuant to a Trust Instrument dated as of May 6, 1993. Neuberger Berman
SOCIALLY RESPONSIVE Trust is a separate operating series of Equity Assets, a
Delaware business trust organized pursuant to a Trust Instrument dated October
18, 1992. Each Trust is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, commonly known as a mutual
fund. Equity Trust has eight separate series. Equity Assets has seven separate
series. Each Fund invests all of net investable assets in its corresponding
Portfolio, in each case receiving a beneficial interest in that Portfolio. The
trustees of the Trusts may establish additional series or classes of shares
without the approval of shareholders. The assets of each series belong only to
that series, and the liabilities of each series are borne solely by that series
and no other.
Prior to January 1, 1995, the names of Neuberger and Berman FOCUS
Trust and Neuberger Berman FOCUS Portfolio were Neuberger Berman Selected
Sectors Trust and Neuberger Berman Selected Sectors Portfolio, respectively.
Prior to November 17, 1995, the name of Neuberger Berman
INTERNATIONAL Portfolio was International Portfolio.
DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
each Fund represent equal proportionate interests in the assets of that Fund
only and have identical voting, dividend, redemption, liquidation, and other
rights. All shares issued are fully paid and non-assessable, and shareholders
have no preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trusts do not intend to
hold annual meetings of shareholders of the Funds. The trustees will call
special meetings of shareholders of a Fund only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of a Fund will not be personally liable for the obligations of any
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or a Fund contain a statement that
such obligation may be enforced only against the assets of that Trust or Fund
and provides for indemnification out of Trust or Fund property of any
shareholder nevertheless held personally liable for Trust or Fund obligations,
respectively.
OTHER. Because Fund shares can be bought, owned and sold only
through an account with an Institution, a client of an Institution may be unable
to purchase additional shares and/or may be required to redeem shares (and
possibly incur a tax liability) if the client no longer has a relationship with
the Institution or if the Institution no longer has a contract with NB
76
<PAGE>
Management to perform services. Depending on the policies of the Institution
involved, an investor may be able to transfer an account from one Institution to
another.
THE PORTFOLIOS
Each Portfolio (except Neuberger Berman INTERNATIONAL Portfolio) is
a separate operating series of Equity Managers Trust, a New York common law
trust organized as of December 1, 1992. Neuberger Berman INTERNATIONAL Portfolio
is a separate operating series of Global Managers Trust, a New York common law
trust organized as of March 18, 1994. The Managers Trusts are registered under
the 1940 Act as diversified, open-end management investment companies. Equity
Managers Trust has six separate Portfolios. Global Managers Trust currently has
one operating Portfolio. The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net investable
assets in its corresponding Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.
Each Fund's investment in its corresponding Portfolio is in the form
of a non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. The Sister Funds that are series of
Neuberger Berman Equity Funds ("Equity Funds") and the other mutual funds that
are series of other trusts invest all of their respective net assets in
corresponding Portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are available for purchase by members of the general public. The
Trusts do not sell their shares directly to members of the general public.
Each Portfolio may also permit other investment companies and/or
other institutional investors to invest in the Portfolio. All investors will
invest in a Portfolio on the same terms and conditions as a Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in a Portfolio
(including the series of Equity Funds and Equity Assets) are not required to
sell their shares at the same public offering price as a Fund, could have a
different administration fee and expenses than a Fund, and (except Equity Funds
and Equity Assets) might charge a sales commission. Therefore, Fund shareholders
may have different returns than shareholders in another investment company that
invests exclusively in the Portfolio. Information regarding any fund that
invests in a Portfolio is available from NB Management by calling 800-877-9700.
The trustees of the Trusts believe that investment in a Portfolio by
a series of Equity Funds or Equity Assets by other potential investors in
addition to a Fund may enable the Portfolio to realize economies of scale that
could reduce its operating expenses, thereby producing higher returns and
benefiting all shareholders. However, a Fund's investment in its corresponding
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor in a Portfolio (other than a
Fund) redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
77
<PAGE>
Each Fund may withdraw its entire investment from its corresponding
Portfolio at any time, if the trustees of the respective Trust determine that it
is in the best interests of the Fund and its shareholders to do so. A Fund might
withdraw, for example, if there were other investors in a Portfolio with power
to, and who did by a vote of all investors (including the Fund), change the
investment objective, policies, or limitations of the Portfolio in a manner not
acceptable to the trustees of the respective Trust. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. That distribution could result in a
less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's investment portfolio. If the Fund decided
to convert those securities to cash, it usually would incur brokerage fees or
other transaction costs. If a Fund withdrew its investment from a Portfolio, the
trustees of the respective Trust would consider what actions might be taken,
including the investment of all of the Fund's net investable assets in another
pooled investment entity having substantially the same investment objective as
the Fund or the retention by the Fund of its own investment manager to manage
its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in a
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, a
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in a Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in a Portfolio, including a
Fund, will be liable for all obligations of the Portfolio. However, the risk
of an investor in a Portfolio incurring financial loss beyond the amount of
its investment on account of such liability would be limited to circumstances
in which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of a Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian for its
securities and cash. State Street also serves as each Fund's transfer agent,
administering purchases, redemptions, and transfers of Fund shares with respect
to Institutions and the payment of dividends and other distributions to
Institutions. All correspondence should be mailed to Neuberger Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. In
addition, State Street serves as transfer agent for each Portfolio (except
Neuberger Berman INTERNATIONAL Portfolio). State Street Cayman serves as
transfer agent for Neuberger Berman INTERNATIONAL Portfolio.
78
<PAGE>
INDEPENDENT AUDITORS/ACCOUNTANTS
Each Fund and Portfolio (other than Neuberger Berman INTERNATIONAL
Portfolio, Neuberger Berman MANHATTAN Trust and Portfolio and Neuberger Berman
SOCIALLY RESPONSIVE Trust and Portfolio) has selected Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116, as the independent auditors who will audit
its financial statements. Neuberger Berman INTERNATIONAL Portfolio has selected
Ernst & Young, Shedden Road, George Town, Grand Cayman, Cayman Islands, British
West Indies as the independent auditors who will audit its financial statements.
Neuberger Berman MANHATTAN Trust and Portfolio and Neuberger Berman SOCIALLY
RESPONSIVE Trust and Portfolio have selected PricewaterhouseCoopers, One Post
Office Square, Boston, MA 02109, as the independent accountants who will audit
their financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at December 1, 1998:
- --------------------------------------------------------------------------------
Percentage of
Ownership at
Name and Address December 1, 1998
- --------------------------------------------------------------------------------
Neuberger Berman MAC & Co. _____%
MANHATTAN Trust A/C 195-643
AEOF 1956432
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
The Northern Trust Co., Trustee _____%
FBO Case Corporation
22-75833
P.O. Box 92956
Chicago, IL 60675-2956
Puig Perfumes _____%
Salary Deferral Plan
9 Skyline Drive
Hawthorne, NY 10532-2100
79
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
Name and Address December 1, 1998
- --------------------------------------------------------------------------------
Neuberger Berman Nationwide Life Insurance _____%
PARTNERS Trust QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
National Financial Services Corp.* _____%
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
PRC Inc.
c/o T. Rowe Price Financial _____%
Attn: Asset Recon.
P.O. Box 17215
Baltimore, MD 21297-0354
Connecticut General Life
Insurance Company _____%
350 Church St.
P.O. Box 2975 M-110
Hartford, CT 06103-1106
Northern Trust Co.,
Trustee _____%
FBO Phycor Savings Plan DV
P.O. Box 92956
Chicago, IL 60675-2956
Fidelity Investments Institutional
Oper. Co. _____%
Agent for certain benefit pln
100 Magellan Way
Mailzone KWIC
Covington, KY 41015-1987
- --------------------------------------------------------------------------------
80
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
Name and Address December 1, 1998
- --------------------------------------------------------------------------------
Neuberger Berman The Northern Trust Co., Trustee _____%
Guardian Trust Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co. _____%
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services Corp.* _____%
P.O. Box 3908
Church Street Station
New York, NY 100008-3908
Fidelity Investments _____%
Institutional Ops Co.
Agent for certain EE benefit plans
Mailzone KWIC
Covington, KY 41015
Neuberger Berman FOCUS National Financial Services _____%
Trust Corp.*
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
-----%
American Express Trust Co.
Benefit of American Express
Trust Retirement Service Plans
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
-----%
Smith Barney Inc.
00109801250
388 Greenwich Street
New York, NY 10013-2375
11.03%
81
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
Name and Address December 1, 1998
- --------------------------------------------------------------------------------
Emjayco
Omnibus Account
P.O. Box 17909
Milwaukee, WI 53217-0909
-----%
Aetna Life Insurance & Annuity
Co.
ACES - Separate Account F
15 Farmington Ave.
Hartford, CT 06156-0001 _____%
MAC & Co.
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
Neuberger Berman National Financial Services _____%
Genesis Trust Corp.*
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
-----%
Profit Sharing Plan for PARTNERS
& Principals of Price Waterhouse
3109 W. Dr. Martin Luther King
Drive
Tampa, FL 33607 _____%
Merrill Lynch, Pierce, Fenner &
Smith, Inc.
Fund Administration
4800 Deer Lake Drive East, 3rd
Floor _____%
Jacksonville, FL 32246-6484
Smith Barney, Inc.
00109801250
388 Greenwich Street _____%
New York, NY 10013-2375
82
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
Name and Address December 1, 1998
- --------------------------------------------------------------------------------
MAC & Co.
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
Neuberger Berman ICMA Retirement Trust _____%
SOCIALLY RESPONSIVE Trust 777 N. Capitol St., N.E.
Washington, D.C. 20002-4239
National Financial Services Corp. holds these shares of record for the
account of certain of its clients and has informed the Funds of its policy to
maintain the confidentiality of holdings in its client accounts unless
disclosure is expressly required by law.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Trusts' registration statements filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration
statements, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete. In
each instance where reference is made to the copy of any contract or other
document filed as an exhibit to a registration statement, each such statement is
qualified in all respects by such reference.
FINANCIAL STATEMENTS
[To be filed.]
83
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin,
and principal is secure. Although the various protective elements are likely to
change, the changes that can be visualized are most unlikely to impair the
fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as "high-grade
A-1
<PAGE>
bonds." They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa-rated securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations that are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each generic
rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
A-2
<PAGE>
Issuers rated PRIME-1 (or related supporting institutions), also known as P-1,
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
- - Leading market positions in well-established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well-established access to a range of financial markets and assured
sources of alternate liquidity.
A-3
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER BERMAN GUARDIAN TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER __, 1998
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger Berman GUARDIAN Trust ("Fund"), a series of Neuberger Berman
Equity Trust ("Trust"), is a no-load mutual fund that offers shares pursuant to
a Prospectus dated December __, 1998. The Fund invests all of its net investable
assets in Neuberger Berman GUARDIAN Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER BERMAN MANAGEMENT INCORPORATED
(EACH AN "INSTITUTION").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger Berman Management Incorporated ("NB Management"),
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or
by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT INFORMATION.........................................................1
Investment Policies and Limitations...................................1
Investment Insight....................................................3
Additional Investment Information.....................................4
PERFORMANCE INFORMATION.......................................................16
Total Return Computations............................................16
Comparative Information..............................................17
Other Performance Information........................................18
CERTAIN RISK CONSIDERATIONS...................................................18
TRUSTEES AND OFFICERS.........................................................18
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................24
Investment Manager and Administrator.................................24
Management and Administration Fees...................................25
Sub-Adviser..........................................................26
Investment Companies Managed.........................................27
Management and Control of NB Management..............................29
DISTRIBUTION ARRANGEMENTS.....................................................30
ADDITIONAL PURCHASE INFORMATION...............................................30
Share Prices and Net Asset Value.....................................30
ADDITIONAL REDEMPTION INFORMATION.............................................31
Suspension of Redemptions............................................31
Redemptions in Kind..................................................31
DIVIDENDS AND OTHER DISTRIBUTIONS.............................................31
<PAGE>
PAGE
----
ADDITIONAL TAX INFORMATION....................................................32
Taxation of the Fund.................................................32
Taxation of the Portfolio............................................32
Taxation of the Fund's Shareholders..................................34
PORTFOLIO TRANSACTIONS........................................................34
Portfolio Turnover...................................................37
REPORTS TO SHAREHOLDERS.......................................................37
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................38
CUSTODIAN AND TRANSFER AGENT..................................................40
INDEPENDENT AUDITORS..........................................................40
LEGAL COUNSEL.................................................................40
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................40
REGISTRATION STATEMENT........................................................41
FINANCIAL STATEMENTS..........................................................42
APPENDIX A....................................................................43
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER......................43
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as a diversified open-end management investment company. The Fund seeks
its investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an open-end management investment company managed by NB Management, are
together referred to below as the "Trusts.")
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of the Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the
Fund or Portfolio represented at a meeting at which more than 50% of the
outstanding Fund or Portfolio shares are represented or
(2) a majority of the outstanding shares of the Fund or Portfolio.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
- -----------------------------------
The Fund has the following fundamental investment policy, to enable it
to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund
may invest all of its investable assets (cash, securities, and
receivables relating to securities) in an open-end management
investment company having substantially the same investment
objective, policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
-1-
<PAGE>
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations are as
follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
-2-
<PAGE>
For purposes of the limitation on commodities, the Portfolio does not
consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security if,
as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
6. PLEDGING. The Portfolio may not pledge or hypothecate any of its
assets, except that the Portfolio may pledge or hypothecate up to 5% of its
total assets in connection with its entry into any agreement or arrangement
pursuant to which a bank furnishes a letter of credit to collateralize a capital
commitment made by the Portfolio to a mutual insurance company of which the
Portfolio is a member.
Although the Portfolio does not have a policy limiting its investment
in warrants, the Portfolio does not currently intend to invest in warrants
unless acquired in units or attached to securities.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, the
Portfolio may invest up to 100% of its total assets in cash and cash
equivalents, U.S. Government and Agency Securities, commercial paper and certain
other money market instruments, as well as repurchase agreements collateralized
by the foregoing.
INVESTMENT INSIGHT
- ------------------
The Portfolio subscribes to the same stock-picking philosophy followed
since Roy R. Neuberger founded Neuberger Berman GUARDIAN Fund (which, like the
Fund, invests all of its net investable assets in the Portfolio) in 1950.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
-3-
<PAGE>
test of management is its ability to make money even when the market is flat or
declining. By that measure, Neuberger Berman GUARDIAN Fund has served
shareholders well and has paid a dividend every quarter and a capital gain
distribution EVERY YEAR since 1950; the Fund has done so since December 1993. Of
course, there can be no assurance that this trend will continue.
The portfolio co-managers place a high premium on being knowledgeable
about the companies whose stocks they buy. That knowledge is important, because
sometimes it takes courage to buy stocks that the rest of the market has
forsaken. The managers would rather buy an undervalued stock because they expect
it to become fairly valued than buy one fairly valued and hope it becomes
overvalued. The managers tend to buy stocks that are out of favor, believing
that an investor is not going to get great companies at great valuations when
the market perception is great.
Investors who switch around a lot are not going to benefit from the
Portfolio's approach. They're following the market -- the Portfolio is looking
at fundamentals.
The Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of the Portfolio's total assets. Of course,
the Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
- ---------------------------------
The Portfolio may make the following investments, among others,
although it may not buy all of the types of securities or use all of the
investment techniques that are described.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
expected to be sold within seven days at approximately the price at which they
are valued. These may include unregistered or other restricted securities and
repurchase agreements maturing in greater than seven days. Illiquid securities
may also include commercial paper under section 4(2) of the Securities Act of
1933, as amended, and Rule 144A securities (restricted securities that may be
traded freely among qualified institutional buyers pursuant to an exemption from
the registration requirements of the securities laws); these securities are
considered illiquid unless NB Management, acting pursuant to guidelines
established by the trustees of Managers Trust, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
considered restricted or illiquid. Illiquid securities may be difficult for the
Portfolio to value or dispose of due to the absence of an active trading market.
The sale of some illiquid securities by the Portfolio may be subject to legal
restrictions which could be costly to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 15% of its net
assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Costs,
delays, or losses could result if the selling party to a repurchase agreement
becomes bankrupt or otherwise defaults. NB Management monitors the
creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. The Portfolio may not
-4-
<PAGE>
enter into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 15% of the value of its net assets would then be invested in
such repurchase agreements and other illiquid securities. The Portfolio may
enter into a repurchase agreement only if (1) the underlying securities are of a
type that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio may lend securities to unaffiliated
entities, including banks, brokerage firms, and other institutional investors
judged creditworthy by NB Management, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the loaned securities,
is continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some risk of
loss of rights in the collateral should the borrower fail financially.
POLICIES AND LIMITATIONS. The Portfolio may lend portfolio securities
with a value not exceeding 33-1/3% of its total assets to banks, brokerage
firms, or other institutional investors judged creditworthy by NB Management.
Borrowers are required continuously to secure their obligations to return
securities on loan from the Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
-5-
<PAGE>
Where registration is required, the Portfolio may be obligated to pay
all or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio Trustees
believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of the Portfolio's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, the
Portfolio will deposit in a segregated account with its custodian cash or
appropriate liquid securities, marked to market daily, in an amount at least
equal to the Portfolio's obligations under the agreement.
FOREIGN SECURITIES. The Portfolio may invest in U.S. dollar-denominated
securities of foreign issuers (including banks, governments, and
quasi-governmental organizations) and foreign branches of U.S. banks, including
negotiable certificates of deposit ("CDs"), bankers' acceptances and commercial
paper. While investments in foreign securities are intended to reduce risk by
providing further diversification, such investments involve sovereign and other
risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of adverse
political and economic developments (including political instability,
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio endeavors to
achieve the most favorable net results on portfolio transactions.
-6-
<PAGE>
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not restricted in
the amount it may invest in securities denominated in any one foreign currency.
Investments in securities of foreign issuers are subject to the
Portfolio's quality standards. The Portfolio may invest only in securities of
issuers in countries whose governments are considered stable by NB Management.
Futures, Options on Futures, Options on Securities and Indices,
Forward Contracts, and Options on Foreign
Currencies (collectively, "Hedging Instruments")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and
sell stock index futures contracts, and may purchase and sell options thereon.
For purposes of managing cash flow, the managers may use such futures and
options to increase the Portfolio's exposure to the performance of a recognized
securities index, such as the S&P "500" Index.
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
-7-
<PAGE>
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
-8-
<PAGE>
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell stock
index futures contracts, and may purchase and sell options thereon. For purposes
of managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P "500" Index.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered call
options and may purchase call options in related closing transactions. The
purpose of writing call options is to hedge (i.e., to reduce, at least in part,
the effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and the Fund's net asset values ("NAVs")) or to earn premium income.
Portfolio securities on which call options may be written and purchased by the
Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk but is capable of
enhancing the Portfolio's total return. When writing a covered call option, the
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
-9-
<PAGE>
If a call option that the Portfolio has written expires unexercised,
the Portfolio will realize a gain in the amount of the premium; however, that
gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call options
and may purchase call options in related closing transactions. The Portfolio
writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio will not do).
The Portfolio would purchase a call option to offset a previously written call
option.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in
the over-the-counter ("OTC") market. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed; the clearing organization in effect guarantees
completion of every exchange-traded option. In contrast, OTC options are
contracts between the Portfolio and a counter-party, with no clearing
organization guarantee. Thus, when the Portfolio writes an OTC option, it
generally will be able to "close out" the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to whom the
Portfolio originally sold the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
-10-
<PAGE>
from being called, or to permit the sale or the put of the underlying security.
There is, of course, no assurance that the Portfolio will be able to effect
closing transactions at favorable prices. If the Portfolio cannot enter into
such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call option. Because increases in the market price of
a call option generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset, in whole or in part, by appreciation of the underlying security owned
by the Portfolio; however, the Portfolio could be in a less advantageous
position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
POLICIES AND LIMITATIONS. The Portfolio may use American-style options.
The assets used as cover (or held in a segregated account) for OTC options
written by the Portfolio will be considered illiquid unless the OTC options are
sold to qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC call option written subject to this
procedure will be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
PUT AND CALL OPTIONS ON SECURITIES INDICES. For purposes of managing
cash flow, the Portfolio may purchase put and call options on securities indices
to increase the Portfolio's exposure to the performance of a recognized
securities index, such as the S&P "500" Index. Unlike a securities option, which
gives the holder the right to purchase or sell a specified security at a
specified price, an option on a securities index gives the holder the right to
receive a cash "exercise settlement amount" equal to (1) the difference between
the exercise price of the option and the value of the underlying securities
index on the exercise date (2) multiplied by a fixed "index multiplier." A
securities index fluctuates with changes in the market values of the securities
included in the index. Options on stock indices are currently traded on the
Chicago Board Options Exchange, the New York Stock Exchange ("NYSE"), the
American Stock Exchange, and other U.S. and foreign exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks similar to
those of securities options, as discussed herein.
-11-
<PAGE>
POLICIES AND LIMITATIONS. For purposes of managing cash flow, the
Portfolio may purchase put and call options on securities indices to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P "500" Index. All securities index options purchased by the
Portfolio will be listed and traded on an exchange.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into contracts
for the purchase or sale of a specific currency at a future date (usually less
than one year from the date of the contract) at a fixed price ("forward
contracts"). The Portfolio also may engage in foreign currency exchange
transactions on a spot (I.E., cash) basis at the spot rate prevailing in the
foreign currency exchange market.
The Portfolio enters into forward contracts in an attempt to hedge
against changes in prevailing currency exchange rates. The Portfolio does not
engage in transactions in forward contracts for speculation; it views
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and if NB Management is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established. If the Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of the Portfolio's securities against a decline in the value of a currency
-12-
<PAGE>
does not eliminate fluctuations in the prices of underlying securities. Because
forward contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid. The Portfolio may experience delays in the settlement
of its foreign currency transactions.
POLICIES AND LIMITATIONS. The Portfolio may enter into forward
contracts for the purpose of hedging and not for speculation.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. Currency options have
characteristics and risks similar to those of securities options, as discussed
herein. Certain options on foreign currencies are traded on the OTC market and
involve liquidity and credit risks that may not be present in the case of
exchange-traded currency options.
POLICIES AND LIMITATIONS. The Portfolio would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
on those securities.
REGULATORY LIMITATIONS ON USING HEDGING INSTRUMENTS. To the extent the
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
COVER FOR HEDGING INSTRUMENTS. Securities held in a segregated account
cannot be sold while the futures, options or forward strategy covered by those
securities is outstanding, unless they are replaced with other suitable assets.
As a result, segregation of a large percentage of the Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio will comply with SEC guidelines
regarding "cover" for Hedging Instruments and, if the guidelines so require, set
aside in a segregated account with its custodian the prescribed amount of cash
or appropriate liquid securities.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that the skills needed
to use Hedging Instruments are different from those needed to select the
Portfolio's securities; (4) the fact that, although use of Hedging Instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
-13-
<PAGE>
or to segregate securities in connection with its use of Hedging Instruments.
There can be no assurance that the Portfolio's use of Hedging Instruments will
be successful.
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information." Hedging Instruments may not
be available with respect to some currencies, especially those of so-called
emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities or
currency. NB Management intends to reduce the risk that the Portfolio will be
unable to close out Hedging Instruments by entering into such transactions only
if NB Management believes there will be an active and liquid secondary market.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in investment grade
corporate bonds and debentures.
U.S. Government Securities are obligations of the U.S. Treasury backed
by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may by supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
Investment grade debt securities are those receiving one of the four
highest ratings from Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed by NB Management comparable to
such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest rating category (Baa) or Comparable Unrated
Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
-14-
<PAGE>
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which the
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up to 35%
of its total assets in debt securities. Subsequent to its purchase by the
Portfolio, an issue of debt securities may cease to be rated or its rating may
be reduced, so that the securities would no longer be eligible for purchase by
the Portfolio. In such a case, the Portfolio will engage in an orderly
disposition of the downgraded securities to the extent necessary to ensure that
the Portfolio's holdings of securities rated below investment grade and
Comparable Unrated Securities will not exceed 5% of its net assets.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued
by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, NB Management may
in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolio may invest in commercial paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or
deemed by NB Management to be of comparable quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.
-15-
<PAGE>
POLICIES AND LIMITATIONS. Convertible debt securities are subject to
the Portfolio's investment policies and limitations concerning fixed income
securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
OTHER INVESTMENT COMPANIES. The Portfolio at times may invest in
instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P "500" Index. As a
shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Portfolio does not intend to invest in such funds
unless, in the judgment of NB Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
POLICIES AND LIMITATIONS. The Portfolio's investment in such securities
is limited to (i) 3% of the total voting stock of any one investment company,
(ii) 5% of the Portfolio's total assets with respect to any one investment
company and (iii) 10% of the Portfolio's total assets in the aggregate.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
the Fund will vary, and an investment in the Fund, when redeemed, may be worth
more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
- -------------------------
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
n
P(1+T) = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
The Fund commenced operations in August 1993. However, the Fund's
investment objective, policies, and limitations are the same as those of
Neuberger Berman GUARDIAN Fund, which is a series of Neuberger Berman Equity
Funds and invests in the Portfolio ("Sister Fund"). The Sister Fund had a
predecessor. The following total return data is for the Fund since its inception
and, for periods prior to the Fund's inception, its Sister Fund (which, as used
herein, includes data for that Sister Fund's predecessor). The total returns for
periods prior to the Fund's inception would have been lower had they reflected
the higher fees of the Fund, as compared to those of the Sister Fund.
<PAGE>
Average Annual Total Returns
Periods Ended 8/31/1998
ONE YEAR FIVE YEARS TEN YEARS PERIOD FROM INCEPTION
-------- ---------- --------- ---------------------
GUARDIAN TRUST
NB Management may from time to time waive a portion of its fees due
from the Fund or Portfolio or reimburse the Fund or Portfolio for a portion of
its expenses. Such action has the effect of increasing total return. Actual
reimbursements are described in the Prospectus and in "Investment Management and
Administration Services" below.
COMPARATIVE INFORMATION
- -----------------------
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500" Composite
Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600
Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock Index,
Russell Midcap Growth Index, Dow Jones Industrial Average ("DJIA"),
Wilshire 1750 Index, Nasdaq Composite Index, Montgomery Securities Growth
Stock Index, Value Line Index, U.S. Department of Labor Consumer Price
Index ("Consumer Price Index"), College Board Annual Survey of Colleges,
Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra
Value Index and various other domestic, international, and global indices.
The S&P 500 Index is a broad index of common stock prices, while the DJIA
represents a narrower segment of industrial companies. The S&P 600 Index
includes stocks that range in market value from $40 million to $2.3
billion, with an average of $451 million. The S&P 400 Index measures
mid-sized companies that have an average market capitalization of $1.6
billion. Each assumes reinvestment of distributions and is calculated
without regard to tax consequences or the costs of investing. The Portfolio
may invest in different types of securities from those included in some of
the above indices.
Evaluations of the Fund's performance, its total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
-17-
<PAGE>
OTHER PERFORMANCE INFORMATION
- -----------------------------
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio diversification by asset type. Information used in Advertisements may
include statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find the Fund to be an attractive investment vehicle
also include parents saving to meet college costs for their children. For
instance, the cost of a college education is rapidly approaching the cost of the
average family home. Estimates of total four-year costs (tuition, room and
board, books and other expenses) for students starting college in various years
may be included in Advertisements, based on the College Board Annual Survey of
Colleges.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of automatic investing at market
highs and/or lows, and investing early versus late for retirement plans also may
be included in Advertisements, if appropriate.
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance the Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman, LLC ("Neuberger Berman").
-18-
<PAGE>
<TABLE>
<CAPTION>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
---------- --------------- -----------------------
<S> <C> <C>
Faith Colish (63) Trustee of each Trust Attorney at Law, Faith Colish, A Professional
63 Wall Street Corporation.
24th Floor
New York, NY 10005
Stanley Egener* (64) Chairman of the Board, Chief Principal of Neuberger Berman; President and
Executive Officer, and Trustee Director of NB Management; Chairman of the
of each Trust Board, Chief Executive Officer and Trustee of
eight other mutual funds for which NB Management acts
as investment manager or administrator.
Howard A. Mileaf (61) Trustee of each Trust Vice President and Special Counsel to
WHX Corporation WHX Corporation (holding company)
110 East 59th Street since 1992; Director of Kevlin
30th Floor Corporation (manufacturer of
New York, NY 10022 microwave and other products).
Edward I. O'Brien* (70) Trustee of each Trust Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 industry's representative in government
relations and regulatory matters at the
federal and state levels); until November
1993, employee of the SIA; Director of Legg
Mason, Inc.
John T. Patterson, Jr. (70) Trustee of each Trust Retired. Formerly, President of SOBRO
7082 Siena Court (South Bronx Overall Economic
Boca Raton, FL 33433 Development Corporation).
John P. Rosenthal (65) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities Securities Inc. (a registered broker-
Burnham Asset Management dealer) since 1991; Director, Cancer
Corp. Treatment Holdings, Inc.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
---------- --------------- -----------------------
Cornelius T. Ryan (67) Trustee of each Trust General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture
315 Post Road West capital partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation; Director
of Capital Cash Management Trust
(money market fund) and Prime Cash Fund.
Gustave H. Shubert (69) Trustee of each Trust Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA 90272 public interest research institution)
since 1989; Honorary Member of the Board of
Overseers of the Institute for Civil
Justice, the Policy Advisory Committee
of the Clinical Scholars Program at the
University of California, the American
Association for the Advancement of Science,
the Counsel on Foreign Relations, and
the Institute for Strategic Studies
(London); advisor to the Program Evaluation
and Methodology Division of the U.S.
General Accounting Office; formerly Senior
Vice President and Trustee of Rand.
Lawrence Zicklin* (62) President and Trustee of Principal of Neuberger Berman; Director
each Trust of NB Management; President and/or
Trustee of five other mutual funds for
which NB Management acts as investment
manager or administrator.
Daniel J. Sullivan (58) Vice President of each Senior Vice President of NB
Trust Management since 1992; Vice President
of eight other mutual funds for which
NB Management acts as investment
manager or administrator.
-20-
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
---------- --------------- -----------------------
Michael J. Weiner (51) Vice President and Senior Vice President of NB Management since
Principal Financial Officer 1992; Treasurer of NB Management from 1992 to
of each Trust 1996; Vice President and Principal Financial
Officer of eight other mutual funds
for which NB Management acts as investment
manager or administrator.
Claudia A. Brandon Secretary of each Trust Vice President of NB Management;
(42) Secretary of eight other mutual funds for
which NB Management acts as investment
manager or administrator.
Richard Russell (51) Treasurer and Principal Vice President of NB Management since 1993;
Accounting Officer of Treasurer and Principal Accounting Officer of
each Trust eight other mutual funds for which NB Management
acts as investment manager or administrator.
Stacy Cooper-Shugrue Assistant Secretary of each Assistant Vice President of NB Management
(35) Trust since 1993; Assistant Secretary of eight
other mutual funds for which NB Management
acts as investment manager or administrator.
C. Carl Randolph (61) Assistant Secretary of each Principal of Neuberger Berman since 1992;
Trust Assistant Secretary of eight other mutual
funds for which NB Management acts as
investment manager or administrator.
-21-
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
---------- --------------- -----------------------
Barbara DiGiorgio (39) Assistant Assistant Vice President of NB Management
Treasurer of each Trust since 1993; Assistant Treasurer since 1996 of
eight other mutual funds for which NB
Management acts as investment manager or
administrator.
Celeste Wischerth (37) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1994; prior thereto, employee of NB
Management; Assistant Treasurer since 1996
of eight other mutual funds for which NB
Management acts as investment manager or
administrator.
</TABLE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of the Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of NB Management and
principals of Neuberger Berman. Mr. O'Brien is an interested person by virtue of
the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of
which, from time to time, serves as a broker or dealer to the Portfolio and
other funds for which NB Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
The following table sets forth information concerning the compensation
of the trustees of the Trust. None of the Neuberger Berman Funds(R) has any
retirement plan for its trustees.
-22-
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/98
<TABLE>
<CAPTION>
Total Compensation from
Investment Companies in the
Name and position Aggregate Compensation Neuberger Berman Fund
With Each Trust from the Trusts Complex Paid to Trustees
- --------------- --------------- ------------------------
<S> <C> <C>
Faith Colish $ $
Trustee (5 other investment companies)
Stanley Egener $ $
Chairman of the Board, (9 other investment companies)
Chief Executive
Officer, and Trustee
Alan R. Gruber, Trustee, and the Estate of
Alan R. Gruber $ $
(3 other investment companies)
Howard A. Mileaf $ $
Trustee (4 other investment companies)
Edward I. O'Brien $ $
Trustee (3 other investment companies)
John T. Patterson, Jr. $ $
Trustee (4 other investment companies)
John P. Rosenthal $ $
Trustee (4 other investment companies)
Cornelius T. Ryan $ $
Trustee (3 other investment companies)
Gustave H. Shubert $ $
Trustee (3 other investment companies)
Lawrence Zicklin $ $
President and Trustee (5 other investment companies)
</TABLE>
-23-
<PAGE>
At November __, 1998, the trustees and officers of the Trusts, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. NB Management serves as
the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, dated as of August 2, 1993 ("Management Agreement").
The Management Agreement was approved by the holders of the interests
in the Portfolio on August 2, 1993. The Management Agreement provides, in
substance, that NB Management will make and implement investment decisions for
the Portfolio in its discretion and will continuously develop an investment
program for the Portfolio's assets. The Management Agreement permits NB
Management to effect securities transactions on behalf of the Portfolio through
associated persons of NB Management. The Management Agreement also specifically
permits NB Management to compensate, through higher commissions, brokers and
dealers who provide investment research and analysis to the Portfolio, although
NB Management has no current plans to pay a material amount of such
compensation.
NB Management provides to the Portfolio, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trusts. See "Trustees and Officers." The Portfolio pays NB
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
NB Management provides facilities, services and personnel, as well as
accounting, recordkeeping, and other services, to the Fund pursuant to an
administration agreement with the Trust, dated August 3, 1993, as amended on
August 2, 1996. ("Administration Agreement"). For such administrative services,
the Fund pays NB Management a fee based on the Fund's average daily net assets,
as described in the Prospectus. NB Management enters into administrative
services agreements with Institutions, pursuant to which it compensates
Institutions for accounting, recordkeeping and other services that they provide
in connection with investments in the Fund.
Institutions may be subject to federal or state laws that limit their
ability to provide certain administrative or distribution-related services. For
example, the Glass-Steagall Act is generally interpreted to prohibit most banks
from underwriting mutual fund shares. NB Management intends to contract with
Institutions for only those services they may legally provide. If, due to a
change in the laws governing Institutions or in the interpretation of any such
law, an Institution is prohibited from performing some or all of the
above-described services, NB Management may be required to find alternative
means of providing those services. Any such change is not expected to impact the
Fund or its shareholders adversely.
-24-
<PAGE>
MANAGEMENT AND ADMINISTRATION FEES
- ----------------------------------
For investment management services, the Portfolio pays NB Management a
fee at the annual rate of 0.55% of the first $250 million of that Portfolio's
average daily net assets, 0.525% of the next $250 million, 0.50% of the next
$250 million, 0.475% of the next $250 million, 0.45% of the next $500 million,
and 0.425% of average daily net assets in excess of $1.5 billion.
NB Management provides administrative services to the Fund that
includes furnishing facilities and personnel for the Fund and performing
accounting, recordkeeping, and other services. For such administrative services,
the Fund pays NB Management a fee at the annual rate of 0.40% of the Fund's
average daily net assets. With the Fund's consent NB Management may subcontract
some of its responsibilities to the Fund under the administration agreement and
may compensate each Institution that provides such services at an annual rate of
up to 0.25% of the average net asset value of Fund shares held through that
Institution.
During the fiscal years ended August 31, 1998, 1997, and 1996, the Fund
accrued management and administration fees as follows:
MANAGEMENT AND ADMINISTRATION FEES
ACCRUED FOR FISCAL YEARS
ENDED AUGUST 31
1998 1997 1996
---- ---- ----
GUARDIAN TRUST $ $14,839,636 $8,821,718
NB Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses (as defined in the Prospectus) so that the Fund's
expense ratio per annum will not exceed the expense ratio of its Sister Fund by
more than 0.10% of the Fund's average daily net assets. This undertaking can be
terminated by NB Management by giving the Fund at least 60 days' prior written
notice. During the period from August 3, 1993 (commencement of operations of the
Fund) to December 31, 1994, NB Management voluntarily undertook to reimburse the
Fund for its Total Operating Expenses so that the Fund's expense ratio per annum
would not exceed the expense ratio of the Sister Fund. During the fiscal years
ended August 31, 1998, 1997, and 1996, NB Management reimbursed the Fund
$_________, $0, and $69,266, respectively, of expenses, under this arrangement.
AMOUNT OF TOTAL OPERATING EXPENSES
REIMBURSED BY NB MANAGEMENT
FOR FISCAL YEARS ENDED AUGUST 31
FUND 1998 1997 1996
---- ---- ----
GUARDIAN TRUST $_____________ $0 $69,266
-25-
<PAGE>
The Management Agreement continues until August 2, 1999. The Management
Agreement is renewable thereafter from year to year with respect to the
Portfolio, so long as its continuance is approved at least annually (1) by the
vote of a majority of the Portfolio Trustees who are not "interested persons" of
NB Management or Managers Trust ("Independent Portfolio Trustees"), cast in
person at a meeting called for the purpose of voting on such approval, and (2)
by the vote of a majority of the Portfolio Trustees or by a 1940 Act majority
vote of the outstanding interests in the Portfolio. The Administration Agreement
continues until August 2, 1999. The Administration Agreement is renewable from
year to year with respect to the Fund, so long as its continuance is approved at
least annually (1) by the vote of a majority of the Fund Trustees who are not
"interested persons" of NB Management or the Trust ("Independent Fund
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940
Act majority vote of the outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with respect
to the Portfolio on 60 days' written notice either by Managers Trust or by NB
Management. The Administration Agreement is terminable, without penalty, with
respect to the Fund on 60 days' written notice either by NB Management or by the
Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on August 2, 1993. [Neuberger Berman is a wholly-owned subsidiary of
Neuberger Berman Inc.]
The Sub-Advisory Agreement provides in substance that Neuberger Berman
will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, NB Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as sub-adviser for all of the other mutual funds managed by
NB Management.
The Sub-Advisory Agreement continues until August 2, 1999 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor more
than 60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
-26-
<PAGE>
Most money managers that come to the Neuberger Berman organization have
at least fifteen years experience. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
- ----------------------------
As of September 30, 1998, the investment companies managed by NB
Management had aggregate net assets of approximately $____ billion. NB
Management currently serves as investment manager of the following investment
companies:
Approximate Net Assets
at September 30,
Name 1988
---- ----
Neuberger Berman Cash Reserves Portfolio $
(investment portfolio for Neuberger
Berman Cash Reserves)
Neuberger Berman Government Money
Portfolio $
(investment portfolio for Neuberger
Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio $
(investment portfolio for Neuberger
Berman High Yield Bond Fund and)
Neuberger Berman Limited Maturity Bond
Portfolio $
(investment portfolio for Neuberger
Berman Limited Maturity Bond Fund
and Neuberger Berman Limited
Maturity Bond Trust)
Neuberger Berman Municipal Securities
Portfolio $
(investment portfolio for Neuberger
Berman Municipal Securities Trust)
Neuberger Berman Municipal Money Portfolio $
(investment portfolio for Neuberger Berman
Municipal Money Fund)
Neuberger Berman Focus Portfolio $
(investment portfolio for Neuberger Berman
Focus Fund, Neuberger Berman Focus Trust,
and Neuberger Berman Focus Assets)
-27-
<PAGE>
Approximate Net Assets
at September 30,
NAME 1988
---- ----
Neuberger Berman Genesis Portfolio $
(investment portfolio for Neuberger
Berman Genesis Fund, Neuberger
Berman Genesis Trust and Neuberger
Berman Genesis Assets)
Neuberger Berman Guardian Portfolio $
(investment portfolio for Neuberger Berman
Guardian Fund, Neuberger Berman Guardian Trust
and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio $
(investment portfolio for Neuberger Berman
International Fund and Neuberger Berman
International Trust)
Neuberger Berman Manhattan Portfolio $
(investment portfolio for Neuberger
Berman Manhattan Fund, Neuberger
Berman Manhattan Trust and
Neuberger Berman Manhattan Assets)
Neuberger Berman Partners Portfolio $
(investment portfolio for Neuberger
Berman Partners Fund,
Neuberger Berman Partners Trust and
Neuberger Berman Partners Assets)
Neuberger Berman Socially Responsive Portfolio $
(investment portfolio for Neuberger
Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive
Trust and Neuberger Berman NYCDC Socially Responsive
Trust)
Advisers Managers Trust $
(seven series)
The investment decisions concerning the Portfolio and the other mutual
funds managed by NB Management (collectively, "Other NB Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolio.
-28-
<PAGE>
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when the Portfolio and one or more of the Other
NB Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to the Portfolio, in other
cases it is believed that the Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolio's
having its advisory arrangements with NB Management outweighs any disadvantages
that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all advisory
clients of Neuberger Berman (including the Portfolio, the Other NB Funds, and
other managed accounts) and personnel of Neuberger Berman and its affiliates.
These include, for example, limits that may be imposed in certain industries or
by certain companies, and policies of Neuberger Berman that limit the aggregate
purchases, by all accounts under management, of the outstanding shares of public
companies.
MANAGEMENT AND CONTROL OF NB MANAGEMENT
- ---------------------------------------
The directors and officers of NB Management, all of whom have offices
at the same address as NB Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President;
Michael F. Malouf, Vice President; Ellen Metzger, Vice President and Secretary;
Paul Metzger, Vice President; S. Basu Mullick, Vice President; Janet W. Prindle,
Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice President;
Jennifer K. Silver, Vice President; Kent C. Simons, Vice President; Frederic B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Allan R. White III, Vice President; Thomas Wolfe, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer;
Ramesh Babu, Assistant Vice President; Valerie Chang, Assistant Vice President;
Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Robert L. Ladd, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Ingrid Saukaitis, Assistant Vice President; Josephine
Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman,
Giuliano, Kassen, Lainoff, Risen, Simons, Sundman and Zicklin and Mmes. Prindle,
Silver and Vale are principals of Neuberger Berman.
Messrs. Egener and Zicklin are trustees and officers and Messrs.
Russell, Sullivan and Weiner and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers of each Trust. C. Carl Randolph, a principal of Neuberger
Berman, also is an officer of each Trust.
-29-
<PAGE>
All of the outstanding voting stock in NB Management is owned by
persons who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in connection
with the offering of the Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, the Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
From time to time, NB Management may enter into arrangements pursuant
to which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement that continues until August 2, 1999. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
- --------------------------------
The Fund's shares are bought or sold at a price that is the Fund's NAV
per share. The NAVs for the Fund and the Portfolio are calculated by subtracting
liabilities from total assets (in the case of the Portfolio, the market value of
the securities the Portfolio holds plus cash and other assets; in the case of
the Fund, its percentage interest in the Portfolio, multiplied by the
Portfolio's NAV, plus any other assets). The Fund's per share NAV is calculated
by dividing its NAV by the number of Fund shares outstanding and rounding the
result to the nearest full cent. The Fund and the Portfolio calculate their NAVs
as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on
each day the NYSE is open.
The Portfolio values securities (including options) listed on the NYSE,
the American Stock Exchange or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last reported sale price on the day the securities are being valued. If
there is no reported sale of such a security on that day, the security is valued
at the mean between its closing bid and asked prices on that day. The Portfolio
values all other securities and assets, including restricted securities, by a
method that the trustees of the Trust believe accurately reflects fair value.
-30-
<PAGE>
If NB Management believes that the price of a security obtained under
the Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of the Managers Trust believe accurately reflects fair value.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the NYSE is closed, (2) when trading on
the NYSE is restricted, (3) when an emergency exists as a result of which it is
not reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described in "Share Prices and Net Asset Value" above. If payment is made in
securities, an Institution generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its share
of any net investment income, (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
currency transactions earned or realized by the Portfolio. The Portfolio's net
investment income consists of all income accrued on portfolio assets less
accrued expenses, but does not include capital and foreign currency gains and
losses. Net investment income and realized gains and losses are reflected in the
Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The
Fund calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
The Fund generally distributes substantially all of its share of the
Portfolio's net investment income, (after deducting expenses incurred directly
by the Fund), if any, near the end of each other calendar quarter. Distributions
of net realized capital and foreign currency gains, if any, normally are paid
once annually, in December.
-31-
<PAGE>
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Institution elects to receive them in
cash ("cash election"). To the extent dividends and other distributions are
subject to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares. A cash
election with respect to the Fund remains in effect until the Institution
notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
- --------------------
In order to continue to qualify for treatment as a RIC under the Code,
the Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Hedging Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by NB Management,
including the Sister Fund, have received rulings from the Internal Revenue
Service ("Service") that each such fund, as an investor in its corresponding
portfolio, will be deemed to own a proportionate share of the portfolio's assets
and income for purposes of determining whether the fund satisfies all the
requirements described above to qualify as a RIC. Although these rulings may not
be relied on as precedent by the Fund, NB Management believes that the reasoning
thereof and, hence, their conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Fund of distributions to it from the Portfolio, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
- -------------------------
The Portfolio has received a ruling from the Service to the effect
that, among other things, the Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, the Portfolio is not subject to federal income tax;
instead, each investor in the Portfolio, such as the Fund, is required to take
into account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard to
whether it has received any cash distributions from the Portfolio. The Portfolio
also is not subject to Delaware or New York income or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (1) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (2) the Fund's share of the Portfolio's losses.
-32-
<PAGE>
Dividends and interest received by the Portfolio, and gains realized by
the Portfolio, may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions ("foreign taxes") that would reduce the
yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder (effective
for the taxable year beginning September 1, 1998) -- that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
-33-
<PAGE>
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in
any PFIC may elect to include in ordinary income each taxable year the excess,
if any, of the fair market value of the stock over the adjusted basis therein as
of the end of that year. Pursuant to the election, a deduction (as an ordinary,
not capital, loss) also would be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election would be adjusted to reflect
the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and entering into forward contracts, involves complex
rules that will determine for income tax purposes the amount, character and
timing of recognition of the gains and losses the Portfolio realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
Hedging Instruments derived by the Portfolio with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts and listed
options thereon ("Section 1256 contracts") are required to be marked to market
(that is, treated as having been sold at market value) for federal income tax
purposes at the end of the Portfolio's taxable year. Sixty percent of any net
gain or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months. However, proposed technical corrections legislation
would clarify that the 20% rate applies.
TAXATION OF THE FUND'S SHAREHOLDERS
- -----------------------------------
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as principal broker for the Portfolio in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the writing of covered call
options on its securities.
-34-
<PAGE>
During the fiscal year ended August 31, 1996, the Portfolio paid
brokerage commissions of $6,886,590, of which $3,542,127 was paid to Neuberger
Berman. During the fiscal year ended August 31, 1997, the Portfolio paid
brokerage commissions of $8,540,335, of which $4,806,913 was paid to Neuberger
Berman.
During the fiscal year ended August 31, 1998, the Portfolio paid
brokerage commissions of $_________, of which $_________ was paid to Neuberger
Berman. Transactions in which the Portfolio used Neuberger Berman as broker
comprised __.__% of the aggregate dollar amount of transactions involving the
payment of commissions, and __.__% of the aggregate brokerage commissions paid
by the Portfolio, during the fiscal year ended August 31, 1998. __.__% of the
$_________ paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$_____________) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, the Portfolio acquired
securities of the following of its "regular brokers or dealers" (as defined in
the 1940 Act) ("Regular B/Ds"): Chevron Oil Finance Company, General Electric
Capital Corp., Merrill, Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley, Dean
Witter, Discover & Co., and State Street Bank and Trust Company, N.A.; at that
date, that Portfolio held the securities of its Regular B/Ds with an aggregate
value as follows: General Electric Capital Corp., $__________; Merrill, Lynch,
Pierce, Fenner & Smith Inc., $___________; and Morgan Stanley, Dean Witter,
Discover & Co., $______________.
Prior to June 15, 1998, Portfolio securities were, from time to time,
loaned by the Portfolio to Neuberger Berman in accordance with the terms and
conditions of an order issued by the SEC. The order exempts such transactions
from provisions of the 1940 Act that would otherwise prohibit such transactions,
subject to certain conditions.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio. The following information reflects interest income earned by the
Portfolio from the cash collateralization of securities loans during the fiscal
years ended 1998, 1997, and 1996. As reflected below, Neuberger Berman received
a portion of the interest income from the cash collateral.
<TABLE>
<CAPTION>
INTEREST INCOME FROM
COLLATERALIZATION OF AMOUNT PAID TO NEUBERGER
NAME OF PORTFOLIO FISCAL YEAR END SECURITIES LOANS BERMAN
<S> <C> <C> <C>
- --------------------------------------------------------------------------- -----------------------------
Neuberger Berman 8/31/98 $________ $________
GUARDIAN Portfolio 8/31/97 $4,005,765 $3,523,486
8/31/96 $2,427,096 $2,129,341
- --------------------------------------------------------------------------- -----------------------------
</TABLE>
In effecting securities transactions, the Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
-35-
<PAGE>
The use of Neuberger Berman as a broker for the Portfolio is subject to
the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
Berman must, in NB Management's judgment, be (1) at least as favorable as those
charged by other brokers having comparable execution capability and (2) at least
as favorable as commissions contemporaneously charged by Neuberger Berman on
comparable transactions for its most favored unaffiliated customers, except for
accounts for which Neuberger Berman acts as a clearing broker for another
brokerage firm and customers of Neuberger Berman considered by a majority of the
Independent Portfolio Trustees not to be comparable to the Portfolio. The
Portfolio does not deem it practicable and in its best interests to solicit
competitive bids for commissions on each transaction effected by Neuberger
Berman. However, consideration regularly is given to information concerning the
prevailing level of commissions charged by other brokers on comparable
transactions during comparable periods of time. The 1940 Act generally prohibits
Neuberger Berman from acting as principal in the purchase of portfolio
securities from, or the sale of portfolio securities to, the Portfolio unless an
appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
-36-
<PAGE>
A committee comprised of officers of NB Management and principals of
Neuberger Berman who are portfolio managers of the Portfolio and Other NB Funds
(collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed Accounts") evaluates semi-annually the nature and quality of the
brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be
higher than the amount another firm might charge if NB Management determines in
good faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolio's benefit.
Kent C. Simons and Kevin L. Risen, each of whom is a Vice President of
NB Management and a principal of Neuberger Berman, are the persons primarily
responsible for making decisions as to specific action to be taken with respect
to the investment portfolio of the Portfolio. Each of them has full authority to
take action with respect to portfolio transactions and may or may not consult
with other personnel of NB Management prior to taking such action.
PORTFOLIO TURNOVER
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing (1)
the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and Portfolio. The Fund's statements show the investments
owned by the Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in the Portfolio.
<PAGE>
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
THE FUND
- --------
The Fund is a separate ongoing series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of December 23, 1992.
The Trust is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Trust has eight separate operating series. The Fund invests all of its
net investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of each series belong
only to that series, and the liabilities of each series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
the Fund represent equal proportionate interests in the assets of the Fund only
and have identical voting, dividend, redemption, liquidation, and other rights.
All shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund shares can be bought, owned and sold only through
an account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with NB Management to
perform services. Depending on the policies of the Institution involved, an
investor may be able to transfer an account from one Institution to another.
THE PORTFOLIO
- -------------
The Portfolio is a separate operating series of Managers Trust, a New
York common law trust organized as of December 1, 1992. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust has six separate Portfolios. The assets of each
Portfolio belong only to that Portfolio, and the liabilities of each Portfolio
are borne solely by that Portfolio and no other.
-38-
<PAGE>
FUND'S INVESTMENTS IN THE PORTFOLIO. The Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net investable
assets in the Portfolio, which is a "master fund." The Portfolio, which has the
same investment objective, policies, and limitations as the Fund, in turn
invests in securities; the Fund thus acquires an indirect interest in those
securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. Series of two other investment
companies, Neuberger Berman Equity Funds ("Equity Funds") and Neuberger Berman
Equity Assets ("Equity Assets"), invest all of their respective net assets in
corresponding Portfolios of Managers Trust. The shares of the series of Equity
Funds are available for purchase by members of the general public. Equity Assets
does not sell its shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the series of Equity Funds and Equity Assets) are not
required to sell their shares at the same public offering price as the Fund,
could have a different administration fee and expenses than the Fund, and
(except Equity Funds and Equity Assets) might charge a sales commission.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests exclusively in the Portfolio.
Information regarding any fund that invests in the Portfolio is available from
NB Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by a
series of Equity Funds or Equity Assets or by other potential investors in
addition to the Fund may enable the Portfolio to realize economies of scale that
could reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders. However, the Fund's investment in the Portfolio
may be affected by the actions of other large investors in the Portfolio, if
any. For example, if a large investor in the Portfolio (other than the Fund)
redeemed its interest in the Portfolio, the Portfolio's remaining investors
(including the Fund) might, as a result, experience higher pro rata operating
expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the trustees of the Trust determine that it is in the best interests of
the Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio to the
Fund. That distribution could result in a less diversified portfolio of
investments for the Fund and could affect adversely the liquidity of the Fund's
investment portfolio. If the Fund decided to convert those securities to cash,
it usually would incur brokerage fees or other transaction costs. If the Fund
withdrew its investment from the Portfolio, the trustees of the Trust would
consider what actions might be taken, including the investment of all of the
Fund's net investable assets in another pooled investment entity having
substantially the same investment objective as the Fund or the retention by the
Fund of its own investment manager to manage its assets in accordance with its
investment objective, policies, and limitations. The inability of the Fund to
find a suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in the
-39-
<PAGE>
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for their respective securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be mailed to Neuberger
Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY
10158-0180. In addition, State Street serves as transfer agent for the
Portfolio.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit their
financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as their
legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by the Fund to own beneficially or of
record 5% or more of the Fund's outstanding shares at December 1, 1998:
-40-
<PAGE>
PERCENTAGE OF OWNERSHIP AT
NAME AND ADDRESS DECEMBER 1, 1998
Neuberger Berman The Northern Trust Co., %
GUARDIAN Trust Trustee
Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co. %
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services Corp.* %
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Fidelity Investments %
Institutional Ops Co.
Agent for certain EE
benefit plans
Mailzone KWIC
Covington, KY 41015
* National Financial Services Corp. holds these shares of record for the account
of certain of its clients and has informed the Fund of its policy to maintain
the confidentiality of holdings in its client accounts unless disclosure is
expressly required by law.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith, may be examined at the SEC's offices in
Washington, D.C. The SEC maintains a Website (http://www.sec.gov) that contains
this SAI, material incorporated by reference, and other information regarding
the Fund and Portfolio.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
-41-
<PAGE>
FINANCIAL STATEMENTS
[To be filed.]
-42-
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is --- extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, the changes that can be visualized are most unlikely to impair
the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
"high-grade bonds." They are rated lower than the best bonds because margins of
-43-
<PAGE>
protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each generic
rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
Issuers rated PRIME-1 (or related supporting institutions), also known
as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
-44-
<PAGE>
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation. - Well-established access to a range of financial
markets and assured sources of alternate liquidity.
-45-
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER BERMAN NYCDC SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER __, 1998
A NO-LOAD MUTUAL FUND
605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180
- -------------------------------------------------------------------------------
NEUBERGER BERMAN NYCDC SOCIALLY RESPONSIVE TRUST ("FUND"), A
SERIES OF NEUBERGER BERMAN EQUITY TRUST ("TRUST"), IS A NO-LOAD MUTUAL FUND THAT
OFFERS SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER __, 1998. THE FUND INVESTS
ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER BERMAN SOCIALLY RESPONSIVE
PORTFOLIO ("PORTFOLIO"). YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH THE
DEFERRED COMPENSATION PLAN OF THE CITY OF NEW YORK AND RELATED AGENCIES AND
INSTRUMENTALITIES ("PLAN").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from the Plan by calling 212-306-7760.
This Statement of Additional Information ("SAI") is not a
prospectus and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make
any representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations..................................1
Investment Insight...................................................4
Description of Social Policy.........................................6
Additional Investment Information....................................9
PERFORMANCE INFORMATION.....................................................23
Total Return Computations...........................................23
Comparative Information.............................................24
Other Performance Information.......................................25
CERTAIN RISK CONSIDERATIONS.................................................25
TRUSTEES AND OFFICERS.......................................................25
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................30
Investment Manager and Administrator................................30
Management and Administration Fees..................................31
Sub-Adviser.........................................................33
Investment Companies Managed........................................33
Management and Control of NB Management.............................36
DISTRIBUTION ARRANGEMENTS...................................................37
ADDITIONAL PURCHASE INFORMATION.............................................37
Share Prices and Net Asset Value....................................37
ADDITIONAL REDEMPTION INFORMATION...........................................38
Suspension of Redemptions...........................................38
Redemptions in Kind.................................................38
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................38
i
<PAGE>
PAGE
ADDITIONAL TAX INFORMATION...............................................39
Taxation of the Fund.............................................39
Taxation of the Portfolio........................................40
Taxation of the Funds' Shareholders..........Error!Bookmark not defined.
PORTFOLIO TRANSACTIONS...................................................44
Portfolio Turnover...............................................47
REPORTS TO SHAREHOLDERS..................................................47
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS...........................47
CUSTODIAN AND TRANSFER AGENT.............................................50
INDEPENDENT ACCOUNTANTS..................................................50
LEGAL COUNSEL............................................................50
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES......................50
REGISTRATION STATEMENT...................................................51
FINANCIAL STATEMENTS.....................................................51
Appendix A...............................................................52
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER..................52
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as a diversified open-end management investment company. The Fund seeks
its investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an open-end management investment company managed by Neuberger Berman
Management Incorporated ("NB Management") are together referred to below as the
"Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of
the Fund or Portfolio represented at a meeting at which more than 50% of the
outstanding Fund or Portfolio shares are represented, or
(2) a majority of the outstanding shares of the Fund or
Portfolio.
These percentages are required by the Investment Company Act of
1940 ("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
The Fund has the following fundamental investment policy, to
enable it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets in an open-end management investment
company having substantially the same investment objective, policies,
and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
1
<PAGE>
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations
are as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical
commodities or contracts thereon, unless acquired as a result of the ownership
of securities or instruments, but this restriction shall not prohibit the
Portfolio from purchasing futures contracts or options (including options on
futures contracts, but excluding options or futures contracts on physical
commodities) or from investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of
the value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to
securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
2
<PAGE>
7. SENIOR SECURITIES. The Portfolio may not issue senior
securities, except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio does
not consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and
limitations are as follows:
1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. LENDING. Except for the purchase of debt securities and
engaging in repurchase agreements, the Portfolio may not make any loans other
than securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities
on margin from brokers or other lenders, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10%
of the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any
security if, as a result, more than 15% of its net assets would be invested in
illiquid securities. Illiquid securities include securities that cannot be sold
within seven days in the ordinary course of business for approximately the
amount at which the Portfolio has valued the securities, such as repurchase
agreements maturing in more than seven days.
In addition, although the Portfolio does not have a policy
limiting its investment in warrants, the Portfolio does not currently intend to
invest in warrants unless acquired in units or attached to securities.
Any part of Neuberger Berman SOCIALLY RESPONSIVE Portfolio's
assets may be retained temporarily in investment grade fixed income securities
of non-governmental issuers, U.S. Government and Agency Securities, repurchase
agreements, money market instruments, commercial paper, and cash and cash
equivalents when NB Management believes that significant adverse market,
economic political, or other circumstances require prompt action to avoid
losses. In addition, the feeder funds that invest in Neuberger Berman SOCIALLY
3
<PAGE>
RESPONSIVE Portfolio deal with large institutional investors, and the Portfolio
may hold such instruments pending investment or payout when the Portfolio has
received a large influx of cash due to sales of Neuberger Berman SOCIALLY
RESPONSIVE Trust shares, or shares of another fund which invests in the
Portfolio, or when it anticipates a substantial redemption. Generally, the
foregoing temporary investments for Neuberger Berman SOCIALLY RESPONSIVE
Portfolio are selected with a concern for the social impact of each investment.
INVESTMENT INSIGHT
Securities for the Portfolio are selected through a two-phase
process. The first is financial. The portfolio manager analyzes a universe of
companies according to NB Management's value-oriented philosophy and looks for
stocks which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. NB
Management's social research is based on the same kind of philosophy that
governs its financial approach: NB Management believes that first-hand knowledge
and experience are its most important tools. Utilizing a database, the portfolio
manager does careful, in-depth tracking and analyzes a large number of companies
on some eighty issues in six broad social categories. The manager uses a wide
variety of sources to determine company practices and policies in these areas.
Performance is analyzed in light of knowledge of the issues and of the best
practices in each industry.
Under normal conditions, at least 65% of the Portfolio's total
assets are invested in accordance with its Social Policy, and at least 65% of
its total assets are invested in equity securities. The Portfolio expects that
substantially all of its equity securities will be selected in accordance with
the Social Policy. On occasion, the portfolio manager may consider deposits with
community banks and credit unions for investment. The Portfolio may also engage
in portfolio management techniques that are not subject to the Social Policy,
such as lending securities and purchasing and selling put and call options on
securities and currencies, futures contracts, options on futures contracts, and
forward contracts.
The portfolio manager understands that, for many issues and in
many industries, absolute standards are elusive and often counterproductive.
Thus, in addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection
process?
A: Our first question is always: On financial grounds alone, is a
company a smart investment? For a company's stock to meet our financial test, it
must pass a number of hurdles.
4
<PAGE>
We look for bargains, just like the portfolio managers of the
other portfolios managed by NB Management. More specifically, we search for
companies that we believe have terrific products, excellent customer service,
and solid balance sheets -- but because they may have missed quarterly earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not
all we examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger Berman each year, and we're also frequently on the
road visiting dozens of corporations. From the Fund's inception, we've met with
representatives of every company we own.
When we're face to face with a CEO, we're searching for answers
to two crucial questions: "Does the company have a vision of where it wants to
go?" and "Can the management team make it happen?" We've analyzed companies for
over three decades, and we always look for companies that have both clear
strategies and management talent.
Q: When you evaluate a company's balance sheet, what matters the
most to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
A: After we're convinced of a company's merits on financial
grounds alone, we review its record as a corporate citizen. In particular, we
look for evidence of leadership in three key areas: concern for the environment,
workplace diversity, and enlightened employment practices.
It should be clear that our social screening always takes place
after we search far and wide for what we believe are the best investment
opportunities available. This is a crucial point, and an analogy can be used to
explain it. Let's assume you're looking to fill a vital position in your
company. What you'd pay attention to first is the candidate's competence: Can he
or she do the job? So after interviewing a number of candidates, you'd narrow
your list to those that are highly qualified. To choose from this smaller group,
5
<PAGE>
you might look at the candidate's personality: Can he or she get along with
everyone in your group?
Obviously, you wouldn't hire an unqualified person simply because
he or she is likable. What you'd probably do is give the job to a highly
qualified person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts.
How do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to the Fund?
A: Our shareholders are looking to invest for the future in more
ways than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
DESCRIPTION OF SOCIAL POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship
between business and society, socially responsive investing ("SRI") is a
mechanism for assuring that investors' social values are reflected in their
investment decisions. As such, SRI is a direct descendent of the successful
effort begun in the early 1970's to encourage companies to divest their South
African operations and subscribe to the Sullivan Principles. Today, a growing
number of individuals and institutions are applying similar strategies to a
broad range of problems.
6
<PAGE>
Although there are many strategies available to the socially
responsive investor, including proxy activism, below-market loans to community
projects, and venture capital, the SRI strategies used by the Portfolio
generally fall into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to
avoid holding securities of companies whose products or policies are seen as
being at odds with the social good. The most common exclusions historically have
involved tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look
for companies with progressive programs that are exemplary or companies which
make it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. THE
WEALTH OF NATIONS is firmly rooted in the Enlightenment conviction that the
purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
is the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger Berman, LLC ("Neuberger Berman"), the Portfolio's
sub-adviser, maintains a database of information about the social impact of the
companies it follows. NB Management uses the database to evaluate social issues
after it deems a stock acceptable from a financial standpoint for acquisition by
the Portfolio. The aim of the database is to be as comprehensive as possible,
given that much of the information concerning corporate responsibility comes
from subjective sources. Information for the database is gathered by Neuberger
Berman in many categories and then analyzed by NB Management in the following
six categories of corporate responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. NB Management looks for
companies that show leadership in areas such as employee training and promotion
policies and benefits, such as flextime, generous profit sharing, and parental
leave. NB Management looks for active programs to promote women and minorities
and takes into account their representation among the officers of an issuer and
members of its board of directors. As a basis for exclusion, NB Management looks
for Equal Employment Opportunity Act infractions and Occupational Safety and
Health Act violations; examines each case in terms of severity, frequency, and
time elapsed since the incident; and considers actions taken by the company
since the violation. NB Management also monitors companies' progress and
attitudes toward these issues.
7
<PAGE>
ENVIRONMENT. A company's impact on the environment depends
largely on the industry. Therefore, NB Management examines a company's
environmental record vis-a-vis those of its peers in the industry. All companies
operating in an industry with inherently high environmental risks are likely to
have had problems in such areas as toxic chemical emissions, federal and state
fines, and Superfund sites. For these companies, NB Management examines their
problems in terms of severity, frequency, and elapsed time. NB Management then
balances the record against whatever leadership the company may have
demonstrated in terms of environmental policies, procedures, and practices. NB
Management defines an environmental leadership company as one that puts into
place strong affirmative programs to minimize emissions, promote safety, reduce
waste at the source, insure energy conservation, protect natural resources, and
incorporate recycling into its processes and products. NB Management looks for
the commitment and active involvement of senior management in all these areas.
Several major manufacturers which still produce substantial amounts of pollution
are among the leaders in developing outstanding waste source reduction and
remediation programs.
PRODUCT. NB Management considers company announcements, press
reports, and public interest publications relating to the health, safety,
quality, labeling, advertising, and promotion of both consumer and industrial
products. NB Management takes note of companies with a strong commitment to
quality and with marketing practices which are ethical and consumer-friendly. NB
Management pays particular attention to companies whose products and services
promote progressive solutions to social problems.
PUBLIC HEALTH. NB Management measures the participation of
companies in such industries and markets as alcohol, tobacco, gambling and
nuclear power. NB Management also considers the impact of products and marketing
activities related to those products on nutritional and other health concerns,
both domestically and in foreign markets.
WEAPONS. NB Management keeps track of domestic military sales
and, whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. NB Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. NB
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high-school mentoring programs,
scholarships and grants, and in-kind donations to specific groups are just a few
ways that companies have responded to these questions.
8
<PAGE>
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by NB Management from a financial
standpoint are analyzed using Neuberger Berman's database. The companies are
then evaluated by the portfolio manager to determine if the companies' policies,
practices, products, and services withstand scrutiny in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves
to objective analysis in varying degrees. Few, however, can be resolved entirely
on the basis of scientifically demonstrable facts. Moreover, a substantial
amount of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at NB Management who interpret
the information.
In applying the information in the database to stock selection
for the Portfolio, NB Management considers several factors. NB Management
examines the severity and frequency of various infractions, as well as the time
elapsed since their occurrence. NB Management also takes into account any
remedial action which has been taken by the company relating to these
infractions. NB Management notes any quality innovations made by the company in
its effort to create positive change and looks at the company's overall approach
to social issues.
* * * * *
The Portfolio invests in a wide array of stocks, and no single
stock makes up more than a small fraction of the Portfolio's total assets. Of
course, the Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others.
It may not buy all of the types of securities or use all of the investment
techniques that are described.
ILLIQUID SECURITIES. Illiquid securities are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under Section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A Securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless NB Management, acting
pursuant to guidelines established by the trustees of the Manager's Trusts,
determines they are liquid. Generally, foreign securities freely tradable in
their principal market are not considered restricted or illiquid. Illiquid
securities may be difficult for a Portfolio to value or dispose of due to the
absence of an active trading market. The sale of some illiquid securities by the
9
<PAGE>
Portfolio may be subject to legal restrictions which could be costly to the
Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 15% of
its net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Costs,
delays, or losses could result if the selling party to a repurchase agreement
becomes bankrupt or otherwise defaults. NB Management monitors the
creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity
of more than seven days are considered to be illiquid securities. The Portfolio
may not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% of the value of its net assets would then be
invested in such repurchase agreements and other illiquid securities. The
Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of a type that the Portfolio's investment policies and
limitations would allow it to purchase directly, (2) the market value of the
underlying securities, including accrued interest, at all times equals or
exceeds the repurchase price, and (3) payment for the underlying securities is
made only upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio may lend securities to
unaffiliated entities, including banks, brokerage firms, and other institutional
investors judged creditworthy by NB Management, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the loaned securities,
is continuously maintained by the Borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a Borrower who has delivered equivalent
collateral. During the time securities are on loan, the Borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the Borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the Borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a Borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of Portfolio securities involve some risk of
loss of rights in the collateral should the Borrower fail financially.
POLICIES AND LIMITATIONS. The Portfolio may lend Portfolio
securities with a value not exceeding 33-1/3% of its total assets to banks,
brokerage firms, or other institutional investors judged creditworthy by NB
10
<PAGE>
Management. Borrowers are required continuously to secure their obligations to
return securities on loan from the Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
Securities lending by the Portfolio is not subject to the Social Policy.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are
considered borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. While a reverse repurchase agreement is
outstanding, the Portfolio will deposit in a segregated account with its
11
<PAGE>
custodian cash or appropriate liquid securities, marked to market daily, in an
amount at least equal to the Portfolio's obligations under the agreement.
FOREIGN SECURITIES. The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. While investments in foreign securities are intended to reduce
risk by providing further diversification, such investments involve sovereign
and other risks, in addition to the credit and market risks normally associated
with domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability,
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio endeavors to
achieve the most favorable net results on portfolio transactions.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
12
<PAGE>
Interest rates prevailing in other countries may affect the
prices of foreign securities and exchange rates for foreign currencies. Local
factors, including the strength of the local economy, the demand for borrowing,
the government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not restricted in
the amount it may invest in securities denominated in any one foreign currency.
Investments in the securities of foreign issuers are subject to the Portfolio's
quality standards. The Portfolio may invest only in securities of issuers in
countries whose governments are considered stable by NB Management.
FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "HEDGING INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and sell
interest rate futures contracts, stock and bond index futures contracts, and
foreign currency futures contracts and may purchase and sell options thereon in
an attempt to hedge against changes in the prices of securities or, in the case
of foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits the Portfolio
to enhance portfolio liquidity and maintain a defensive position without having
to sell portfolio securities. The Portfolio views investment in (i) interest
rate and securities index futures and options thereon as a maturity management
device and/or a device to reduce risk or preserve total return in an adverse
environment for the hedged securities, and (ii) foreign currency futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies that
are held or intended to be acquired by the Portfolio.
A "sale" of a futures contract (or a "short" futures position)
entails the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a futures contract (or a "long" futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are
traded on exchanges that have been designated as "contract markets" by the
Commodity Futures Trading Commission ("CFTC"); futures transactions must be
executed through a futures commission merchant that is a member of the relevant
13
<PAGE>
contract market. The exchange's affiliated clearing organization guarantees
performance of the contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or a loss.
"Margin" with respect to a futures contract is the amount of
assets that must be deposited by the Portfolio with, or for the benefit of, a
futures commission merchant in order to initiate and maintain the Portfolio's
futures positions. The margin deposit made by the Portfolio when it enters into
a futures contract ("initial margin") is intended to assure its performance of
the contract. If the price of the futures contract changes -- increases in the
case of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily net asset value ("NAV"), the Portfolio marks to market the value of its
open futures positions. The Portfolio also must make margin deposits with
respect to options on futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts
will benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
14
<PAGE>
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in
the price of a futures contract or option thereon during a single trading day;
once the daily limit has been reached, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell
futures contracts and may purchase and sell options thereon in an attempt to
hedge against changes in the prices of securities or, in the case of foreign
currency futures and options thereon, to hedge against prevailing currency
exchange rates. The Portfolio does not engage in transactions in futures and
options on futures for speculation. The use of futures and options on futures by
the Portfolio is not subject to the Social Policy.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered call
options and may purchase call options on securities. The purpose of writing call
options is to hedge (I.E., to reduce, at least in part, the effect of price
fluctuations of securities held by the Portfolio on the Portfolio's and the
Fund's NAVs) or to earn premium income. Portfolio securities on which call
options may be written and purchased by the Portfolio are purchased solely on
the basis of investment considerations consistent with the Portfolio's
investment objective.
When the Portfolio writes a call option, it is obligated to sell
a security to a purchaser at a specified price at any time until a certain date
if the purchaser decides to exercise the option. The Portfolio receives a
premium for writing the call option. So long as the obligation of the call
option continues, the Portfolio may be assigned an exercise notice, requiring it
to deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying a call option at
less than the market price.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk but is capable of
enhancing the Portfolio's total return. When writing a covered call option, the
Portfolio, in return for the premium, gives up the opportunity for profit from a
15
<PAGE>
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
If a call option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium;
however, that gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Portfolio will realize a gain or loss from the sale of the underlying
security.
When the Portfolio purchases a call option, it pays a premium for
the right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call
options and may purchase call options in related closing transactions. The
Portfolio writes only "covered" call options on securities it owns (in contrast
to the writing of "naked" or uncovered call options, which the Portfolios will
not do).
The Portfolio would purchase a call option to offset a previously
written call option. The Portfolio also may purchase a call option to protect
against an increase in the price of securities it intends to purchase. The use
of call options on securities by the Portfolio is not subject to the Social
Policy.
PUT OPTIONS ON SECURITIES. The Portfolio may write and purchase
put options on securities. The Portfolio will receive a premium for writing a
put option, which obligates the Portfolio to acquire a security at a certain
price at any time until a certain date if the purchaser decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
When the Portfolio purchases a put option, it pays a premium to
the writer for the right to sell a security to the writer for a specified amount
at any time until a certain date. The Portfolio might purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
Portfolio securities on which put options may be written and
purchased by the Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective. When
writing a put option, the Portfolio, in return for the premium, takes the risk
that it must purchase the underlying security at a price that may be higher than
the current market price of the security. If a put option that the Portfolio has
written expires unexercised, the Portfolio will realize a gain in the amount of
the premium.
POLICIES AND LIMITATIONS. The Portfolio generally writes and
purchases put options on securities for hedging purposes (I.E., to reduce, at
least in part, the effect of price fluctuations of securities held by the
Portfolio on the Portfolio's and the Fund's NAVs). The use of put options on
securities by the Portfolio is not subject to the Social Policy.
16
<PAGE>
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price
of an option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in
the over-the-counter ("OTC") market. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed; the clearing organization in effect guarantees
completion of every exchange-traded option. In contrast, OTC options are
contracts between the Portfolio and a counter-party, with no clearing
organization guarantee. Thus, when the Portfolio sells (or purchases) an OTC
option, it generally will be able to "close out" the option prior to its
expiration only by entering into a closing transaction with the dealer to whom
(or from whom) the Portfolio originally sold (or purchased) the option. There
can be no assurance that the Portfolio would be able to liquidate an OTC option
at any time prior to expiration. Unless the Portfolio is able to effect a
closing purchase transaction in a covered OTC call option it has written, it
will not be able to liquidate securities used as cover until the option expires
or is exercised or until different cover is substituted. In the event of the
counter-party's insolvency, the Portfolio may be unable to liquidate its options
position and the associated cover. NB Management monitors the creditworthiness
of dealers with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes
(or purchases) an option is the amount at which the option is currently traded
on the applicable market. The premium may reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to the market price, the historical price volatility of the
underlying security, the length of the option period, the general supply of and
demand for credit, and the interest rate environment. The premium received by
the Portfolio for writing an option is recorded as a liability on the
Portfolio's statement of assets and liabilities. This liability is adjusted
daily to the option's current market value.
Closing transactions are effected in order to realize a profit
(or minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from writing the call or put option. Because increases in the
17
<PAGE>
market price of a call option generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call option
is likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection
with purchasing or writing options, including those used to close out existing
positions. From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours
during which the underlying securities are traded. To the extent that the
options markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the options markets.
POLICIES AND LIMITATIONS. The Portfolio may use American-style
options. The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option. The use of put and call options by the Portfolio is not subject
to the Social Policy.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio also may engage in foreign currency
exchange transactions on a spot (I.E., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Portfolio enters into forward contracts in an attempt to
hedge against changes in prevailing currency exchange rates. The Portfolio does
not engage in transactions in forward contracts for speculation; it views
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
18
<PAGE>
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange
rate risks perfectly, and, if NB Management is incorrect in its judgment of
future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge had not been established. If the
Portfolio uses proxy-hedging, it may experience losses on both the currency in
which it has invested and the currency used for hedging if the two currencies do
not vary with the expected degree of correlation. Using forward contracts to
protect the value of the Portfolio's securities against a decline in the value
of a currency does not eliminate fluctuations in the prices of the underlying
securities. Because forward contracts are not traded on an exchange, the assets
used to cover such contracts may be illiquid. The Portfolio may experience
delays in the settlement of its foreign currency transactions.
POLICY AND LIMITATIONS. The Portfolio may enter into forward
contracts for the purpose of hedging and not for speculation. The use of forward
contracts by the Portfolio is not subject to the Social Policy.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and
purchase covered call and put options on foreign currencies. Currency options
have characteristics and risks similar to those of securities options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.
POLICY AND LIMITATIONS. The Portfolio would use options on
foreign currencies to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities. The use of options on currencies by the
Portfolio is not subject to the Social Policy.
19
<PAGE>
REGULATORY LIMITATIONS ON USING HEDGING INSTRUMENTS. To the
extent the Portfolio sells or purchases futures contracts or writes options
thereon or options on foreign currencies that are traded on an exchange
regulated by the CFTC other than for BONA FIDE hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums on those positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the Portfolio's net assets.
COVER FOR HEDGING INSTRUMENTS. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that the skills needed
to use Hedging Instruments are different from those needed to select the
Portfolio's securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Hedging Instruments.
There can be no assurance that the Portfolio's use of Hedging Instruments will
be successful.
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information." Hedging Instruments may not
be available with respect to some currencies, especially those of so-called
emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the
risk of imperfect correlation by investing only in Hedging Instruments whose
behavior is expected to resemble or offset that of the Portfolio's underlying
securities or currency. NB Management intends to reduce the risk that the
Portfolio will be unable to close out Hedging Instruments by entering into such
transactions only if NB Management believes there will be an active and liquid
secondary market.
20
<PAGE>
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures.
U.S. Government Securities are obligations of the U.S. Treasury
backed by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may by supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the
four highest ratings from Moody's Investor Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating
organizations ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management
comparable to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest rating category (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality
of securities it undertakes to rate. Ratings are not absolute standards of
quality; consequently, securities with the same maturity, coupon, and rating may
have different yields. Although the Portfolio may rely on the ratings of any
NRSRO, the Portfolio primarily refers to ratings assigned by S&P and Moody's,
which are described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's inability
to meet principal and interest payments on its obligations ("credit risk") and
are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which the
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up to
35% of its total assets in debt securities. Subsequent to its purchase by the
Portfolio, an issue of debt securities may cease to be rated or its rating may
be reduced, so that the securities would no longer be eligible for purchase by
21
<PAGE>
the Portfolio. In such a case, the Portfolio will engage in an orderly
disposition of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security
issued by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, NB Management may
in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolio may invest in commercial
paper only if it receives the highest rating from S&P (A-1) or Moody's (P-1) or
is deemed by NB Management to be of comparable quality.
ZERO COUPON SECURITIES. The Portfolio may invest in zero coupon
securities, which are debt obligations that do not entitle the holder to any
periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue
discount") must be taken into account ratably by the Portfolio prior to the
receipt of any actual payments. Because the Fund must distribute substantially
all of its net income (including its share of the Portfolio's accrued original
issue discount) to the Plan each year for income and excise tax purposes, the
Portfolio may have to dispose of portfolio securities under disadvantageous
circumstances to generate cash, or may be required to borrow, to satisfy the
Fund's distribution requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having a similar maturity and
credit quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
22
<PAGE>
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
The price of a convertible security often reflects variations in
the price of the underlying common stock in a way that non-convertible debt may
not. Convertible securities are typically issued by smaller capitalization
companies whose stock prices may be volatile. A convertible security may be
subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio
is called for redemption, the Portfolio will be required to convert it into the
underlying common stock, sell it to a third party or permit the issuer to redeem
the security. Any of these actions could have an adverse effect on the
Portfolio's and the Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 20% of
its net assets in convertible securities. The Portfolio does not intend to
purchase any convertible securities that are not investment grade. Convertible
debt securities are subject to the Portfolio's investment policies and
limitations concerning fixed income securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock.
Unlike interest payments on debt securities, dividends on preferred stock are
generally payable at the discretion of the issuer's board of directors.
Preferred shareholders may have certain rights if dividends are not paid but
generally have no legal recourse against the issuer. Shareholders may suffer a
loss of value if dividends are not paid. The market prices of preferred stocks
are generally more sensitive to changes in the issuer's creditworthiness than
are the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results
and are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An
average annual compounded rate of return ("T") may be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n") according to the
formula:
P(1+T)n = ERV
Average annual total return smoothes out year-to-year variations
in performance and, in that respect, differs from actual year-to-year results.
The average annual total returns for the Fund for the one-year
period ended August 31, 1998, and for the period from March 14, 1994
23
<PAGE>
(commencement of operations) through August 31, 1998 were -5.49% and 14.82%,
respectively. Had NB Management not reimbursed certain expenses, total return
would have been lower.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published
by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance of
mutual funds, such as Lipper Analytical Services, Inc., C.D.A.
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, Investment Company Data Inc., Morningstar, Inc., Micropal
Incorporated, and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
magazines, The Wall Street Journal, The New York Times, Kiplinger's
Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Growth Index, Dow Jones Industrial Average
("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index, Montgomery
Securities Growth Stock Index, Value Line Index, U.S. Department of
Labor Consumer Price Index ("Consumer Price Index"), College Board
Annual Survey of Colleges, Kanon Bloch's Family Performance Index, the
Barra Growth Index, the Barra Value Index, and various other domestic,
international, and global indices. The S&P 500 Index is a broad index of
common stock prices, while the DJIA represents a narrower segment of
industrial companies. The S&P 600 Index includes stocks that range in
market value from $39 million to $2.3 billion, with an average of $451
million. The S&P 400 Index measures mid-sized companies that have an
average market capitalization of $1.6 billion. Each assumes reinvestment
of distributions and is calculated without regard to tax consequences or
the costs of investing. The Portfolio may invest in different types of
securities from those included in some of the above indices.
The Fund's performance may also be compared to various socially
responsive indices. These include The Domini Social Index and the indices
developed by the quantitative department of Prudential Securities, such as that
department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin"
Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
24
<PAGE>
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements. This information may include the Portfolio's portfolio
diversification by asset type or by the social characteristics of companies
owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
Information relating to inflation and its effects on the dollar
also may be included in Advertisements. For example, after ten years, the
purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465, and
$12,100, respectively, if the annual rates of inflation during that period were
4%, 5%, 6%, and 7%, respectively. (To calculate the purchasing power, the value
at the end of each year is reduced by the inflation rate for the ten-year
period.)
Information regarding the effects of investing at market highs
and/or lows, and investing early versus late for retirement plans also may be
included in Advertisements, if appropriate.
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the
trustees and officers of the Trusts, including their addresses and principal
business experience during the past five years. Some persons named as trustees
and officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
Positions Held with
the Trust and
NAME, AGE, EQUITY MANAGERS TRUST PRINCIPAL OCCUPATION(S)(2)
AND ADDRESS(1)
Faith Colish (63) Trustee of each Attorney at Law, Faith
63 Wall Street Trust Colish, A Professional
24th Floor Corporation.
New York, NY 10005
25
<PAGE>
Positions Held with
the Trust and
NAME, AGE, EQUITY MANAGERS TRUST PRINCIPAL OCCUPATION(S)(2)
AND ADDRESS(1)
Stanley Egener* (64) Chairman of the Principal of Neuberger
Board, Chief Berman; President and
Executive Director of NB Management;
Officer, and Chairman of the Board,
Trustee of each Chief Executive Officer
Trust and Trustee of eight other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Howard A. Mileaf (61) Trustee of each Vice President and Special
WHX Corporation Trust Counsel to WHX Corporation
110 East 59th Street (holding company) since
30th Floor 1992; Director of Kevlin
New York, NY 10022 Corporation (manufacturer
of microwave and other
products).
Edward I. O'Brien* (70) Trustee of each Until 1993, President of
12 Woods Lane Trust the Securities Industry
Scarsdale, NY 10583 Association ("SIA")
(securities industry's
representative in government
relations and regulatory
matters at the federal and
state levels); until
November 1993, employee of
the SIA; Director of Legg
Mason, Inc.
John T. Patterson, Jr. Trustee of each Retired. Formerly,
(70) Trust President of SOBRO (South
7082 Siena Court Bronx Overall Economic
Boca Raton FL 33433 Development Corporation).
John P. Rosenthal (65) Trustee of each Senior Vice President of
Burnham Securities Inc. Trust Burnham Securities Inc. (a
Burnham Asset Management registered broker-dealer)
Corp. since 1991; Director,
1325 Avenue of the Cancer Treatment Holdings,
Americas Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (67) Trustee of each General Partner of Oxford
Oxford Bioscience Trust Partners and Oxford
Partners Bioscience Partners
315 Post Road West (venture capital
Westport, CT 06880 partnerships) and
President of Oxford Venture
Corporation; Director of
Capital Cash Management
Trust (money market fund)
and Prime Cash Fund.
26
<PAGE>
Positions Held with
the Trust and
NAME, AGE, EQUITY MANAGERS TRUST PRINCIPAL OCCUPATION(S)(2)
AND ADDRESS(1)
Gustave H. Shubert (69) Trustee of each Senior Fellow/Corporate
13838 Sunset Boulevard Trust Advisor and Advisory
Pacific Palisades, CA Trustee of Rand (a
90272 non-profit public interest
research institution) since
1989; Honorary Member of the
Board of Overseers of the
Institute for Civil Justice,
the Policy Advisory
Committee of the Clinical
Scholars Program at the
University of California,
the American Association for
the Advancement of Science,
the Counsel on Foreign
Relations, and the Institute
for Strategic Studies
(London); advisor to the
Program Evaluation and
Methodology Division of the
U.S. General Accounting
Office; formerly Senior Vice
President and Trustee of
Rand.
Lawrence Zicklin* (62) President and Principal of Neuberger
Trustee of each Berman; Director of NB
Trust Management; President
and/or Trustee of five other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Daniel J. Sullivan (58) Vice President of Senior Vice President of
each Trust NB Management since 1992;
Vice President of eight
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Michael J. Weiner (51) Vice President Senior Vice President of
and Principal NB Management since 1992;
Officer Treasurer Financial of NB Management
1992 to 1996; of each Trust from Vice
President and Principal
Financial Officer of eight
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Claudia A. Brandon (42) Secretary of each Vice President of NB
Trust Management; Secretary of
eight other mutual funds for
which NB Management acts as
investment manager or
administrator.
27
<PAGE>
Positions Held with
the Trust and
NAME, AGE, EQUITY MANAGERS TRUST PRINCIPAL OCCUPATION(S)(2)
AND ADDRESS(1)
Richard Russell (51) Treasurer and Vice President of NB
Principal Management since 1993;
Accounting Treasurer and Principal
Officer of each Accounting Officer of
Trust eight other mutual funds
for which NB Management acts
as investment manager or
administrator.
Stacy Cooper-Shugrue (35) Assistant Assistant Vice President
Secretary of each of NB Management since
Trust 1993; Assistant Secretary of
eight other mutual funds for
which NB Management acts as
investment manager or
administrator.
C. Carl Randolph (61) Assistant Principal of Neuberger
Secretary of each Berman since 1992;
Trust Assistant Secretary of
eight other mutual funds for
which NB Management acts as
investment manager or
administrator.
Barbara DiGiorgio (39) Assistant Assistant Vice President
Treasurer of each of NB Management since
Trust 1993; Assistant Treasurer
since 1996 of eight other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Celeste Wischerth (36) Assistant Assistant Vice President
Treasurer of each of NB Management since
Trust 1994; Assistant Treasurer
since 1996 of eight other
mutual funds for which NB
Management acts as
investment manager or
administrator.
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of NB Management and
28
<PAGE>
principals of Neuberger Berman. Mr. O'Brien is an interested person by virtue of
the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of
which, from time to time, serves as a broker or dealer to the Portfolio and
other funds for which NB Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger Berman Funds(R)
has any retirement plan for its trustees.
Total Compensation from
Aggregate Investment Companies in the
Compensation from Neuberger Berman FUND
NAME AND POSITION WITH THE THE TRUST COMPLEX PAID TO TRUSTEES
TRUST
- -------------------------- ------------------ ---------------------------
Faith Colish $ $
Trustee (5 other investment
companies)
Stanley Egener $ $
Chairman of the Board, Chief (9 other investment
Executive Officer, and companies)
Trustee
Alan R. Gruber, Trustee, and $ $
The Estate of (3 other investment
Alan R. Gruber companies)
Howard A. Mileaf $ $
Trustee (4 other investment
companies)
Edward I. O'Brien $ $
Trustee (3 other investment
companies)
29
<PAGE>
Total Compensation from
Aggregate Investment Companies in the
Compensation from Neuberger Berman FUND
NAME AND POSITION WITH THE THE TRUST COMPLEX PAID TO TRUSTEES
TRUST
- -------------------------- ------------------ ---------------------------
John T. Patterson, Jr. $ $
Trustee (4 other investment
companies)
John P. Rosenthal $ $
Trustee (4 other investment
companies)
Cornelius T. Ryan $ $
Trustee (3 other investment
companies)
Gustave H. Shubert $ $
Trustee (3 other investment
companies)
Lawrence Zicklin $ $
President and Trustee (5 other investment
companies)
At November __, 1998, the trustees and officers of the Trusts, as
a group, owned beneficially or of record less than 1% of the outstanding shares
of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Fund's net investable assets are invested in
the Portfolio, the Fund does not need an investment manager. NB Management
serves as the investment manager to the Portfolio pursuant to a management
agreement with Managers Trust, on behalf of the Portfolio, dated as of August 2,
1993 ("Management Agreement").
The Management Agreement was approved by the holders of the
interests in the Portfolio on March 9, 1994. The Portfolio was authorized to
become subject to the Management Agreement by vote of the Portfolio Trustees on
October 20, 1993, and became subject to it on March 14, 1994.
30
<PAGE>
The Management Agreement provides, in substance, that NB
Management will make and implement investment decisions for the Portfolio in its
discretion and will continuously develop an investment program for the
Portfolio's assets. The Management Agreement permits NB Management to effect
securities transactions on behalf of the Portfolio through associated persons of
NB Management. The Management Agreement also specifically permits NB Management
to compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although NB Management has no
current plans to pay a material amount of such compensation.
NB Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trusts. See "Trustees and Officers." The Portfolio pays NB
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
NB Management provides facilities, services, and personnel, as
well as accounting, recordkeeping, and other services to the Fund pursuant to an
administration agreement with the Trust, dated August 3, 1993, as amended on
August 2, 1996 ("Administration Agreement"). For such administrative services,
the Fund pays NB Management a fee based on the Fund's average daily net assets,
as described in the Prospectus.
MANAGEMENT AND ADMINISTRATION FEES
For investment management services, the Portfolio pays NB
Management a fee at the annual rate of 0.55% of the first $250 million of the
Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50% of
the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500
million, and 0.425% of average daily net assets in excess of $1.5 billion.
NB Management provides administrative services to the Fund that
include furnishing facilities and personnel for the Fund and performing
accounting, recordkeeping, and other services. For such administrative services,
the Fund pays NB Management a fee at the annual rate of 0.05% of the Fund's
average daily net assets. With the Fund's consent NB Management may subcontract
some of its responsibilities to the Fund under the administration agreement.
During the fiscal years ended August 31, 1998, 1997 and 1996, the
Fund accrued management and administration as follows:
31
<PAGE>
Management and Administration Fees
Accrued for Fiscal Years
Fund Ended August 31
1998 1997 1996
---- ---- ----
NYCDC SOCIALLY RESPONSIVE TRUST $1,293,266 $930,548 $660,441
NB Management has voluntarily undertaken to reimburse the Fund
for its total operating expenses which exceed, in the aggregate, 0.60% per annum
of the Fund's average daily net assets. This undertaking can be terminated by NB
Management by giving the Fund at least 60 days' prior written notice.
Amount of Total Operating Expenses
Reimbursed by NB Management
Fund for Fiscal Years Ended August 31
1998 1997 1996
---- ---- ----
NYCDC SOCIALLY RESPONSIVE TRUST $212,528 $206,224 $224,030
The Management Agreement continues until August 2, 1999 and is
renewable thereafter from year to year, so long as its continuance is approved
at least annually (1) by the vote of a majority of the Portfolio Trustees who
are not "interested persons" of NB Management or Managers Trust ("Independent
Portfolio Trustees"), cast in person at a meeting called for the purpose of
voting on such approval, and (2) by the vote of a majority of the Portfolio
Trustees or by a 1940 Act majority vote of the outstanding interests in the
Portfolio. The Administration Agreement continues until August 2, 1999. The
Administration Agreement is renewable from year to year with respect to the
Fund, so long as its continuance is approved at least annually (1) by the vote
of a majority of the Fund Trustees who are not "interested persons" of NB
Management or the Trust ("Independent Fund Trustees"), cast in person at a
meeting called for the purpose of voting on such approval, and (2) by the vote
of a majority of the Fund Trustees or by a 1940 Act majority vote of the
outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by NB Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by NB Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
32
<PAGE>
SUB-ADVISER
NB Management retains Neuberger Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement").
The Sub-Advisory Agreement was approved by the holders of the
interests in the Portfolio on March 9, 1994. The Portfolio was authorized to
become subject to the Sub-Advisory Agreement by vote of the Portfolio Trustees
on October 20, 1993, and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger
Berman will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, NB Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as sub-adviser for all of the other mutual funds managed by
NB Management.
The Sub-Advisory Agreement continues until August 2, 1999 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor more
than 60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger Berman
organization have at least fifteen years experience. Neuberger Berman and NB
Management employ experienced professionals that work in a competitive
environment.
INVESTMENT COMPANIES MANAGED
As of September 30, 1998, the investment companies managed by NB
Management had aggregate net assets of approximately $____ billion. NB
Management currently serves as investment manager of the following investment
companies:
33
<PAGE>
Approximate Net Assets
at September 30,
NAME 1998
Neuberger Berman Cash Reserves Portfolio $
(investment portfolio for Neuberger
Berman Cash Reserves)
Neuberger Berman Government Money Portfolio $
(investment portfolio for Neuberger
Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio $
(investment portfolio for Neuberger
Berman High Yield Bond Fund )
Neuberger Berman Limited Maturity Bond $
Portfolio
(investment portfolio for Neuberger
Berman Limited Maturity Bond Fund and
Neuberger Berman Limited Maturity
Bond Trust)
Neuberger Berman Municipal Securities $
Portfolio
(investment portfolio for Neuberger
Berman Municipal Securities Trust)
Neuberger Berman Municipal Money Portfolio $
(investment portfolio for Neuberger
Berman Municipal Money Fund)
Neuberger Berman Focus Portfolio $
(investment portfolio for Neuberger
Berman Focus Fund, Neuberger Berman
Focus Trust, and Neuberger Berman
Focus Assets)
Neuberger Berman Genesis Portfolio $
(investment portfolio for Neuberger
Berman Genesis Fund, Neuberger Berman
Genesis Trust and Neuberger Berman
Genesis Assets)
34
<PAGE>
Approximate Net Assets
at September 30,
NAME 1998
Neuberger Berman Guardian Portfolio $
(investment portfolio for Neuberger
Berman Guardian Fund, Neuberger
Berman Guardian Trust and Neuberger
Berman Guardian Assets)
Neuberger Berman International Portfolio $
(investment portfolio for Neuberger
Berman International Fund and
Neuberger Berman International Trust)
Neuberger Berman Manhattan Portfolio $
(investment portfolio for Neuberger
Berman Manhattan Fund, Neuberger
Berman Manhattan Trust and Neuberger
Berman Manhattan Assets)
Neuberger Berman Partners Portfolio $
(investment portfolio for Neuberger
Berman Partners Fund,
Neuberger Berman Partners Trust and
Neuberger Berman Partners Assets)
Neuberger Berman Socially Responsive Portfolio $
(investment portfolio for Neuberger
Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive
Trust and Neuberger Berman NYCDC
Socially Responsive Trust)
Advisers Managers Trust $
(seven series)
The investment decisions concerning the Portfolio and the other
mutual funds managed by NB Management (collectively, "Other NB Funds") have been
and will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
35
<PAGE>
There may be occasions when the Portfolio and one or more of the
Other NB Funds or other accounts managed by Neuberger Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolio, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
the aggregate purchases, by all accounts under management, of the outstanding
shares of public companies.
MANAGEMENT AND CONTROL OF NB MANAGEMENT
The directors and officers of NB Management, all of whom have
offices at the same address as NB Management, are Richard A. Cantor, Chairman of
the Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President;
Michael F. Malouf, Vice President; Ellen Metzger, Vice President and Secretary;
Paul Metzger, Vice President; S. Basu Mullick, Vice President; Janet W. Prindle,
Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice President;
Jennifer K. Silver, Vice President; Kent C. Simons, Vice President; Frederic B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Alan R. White III, Vice President; Thomas Wolfe, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer;
Ramesh Babu, Assistant Vice President; Valerie Chang, Assistant Vice President;
Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Robert L. Ladd, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Ingrid Saukaitis, Assistant Vice President; Josephine
Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman,
Giuliano, Kassen, Lainoff, Risen, Simons, Sundman and Zicklin and Mmes. Prindle,
Silver and Vale are principals of Neuberger Berman.
36
<PAGE>
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Russell, Sullivan, and Weiner, and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers of each Trust. C. Carl Randolph, a principal of Neuberger
Berman, also is an officer of each Trust.
All of the outstanding voting stock in NB Management is owned by
persons who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to the
Plan. In connection with the sale of its shares, the Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares to the Plan without sales commission
or other compensation and bears all advertising and promotion expenses incurred
in the sale of the Fund's shares.
The Trust, on behalf of the Fund, and the Distributor are parties
to a Distribution Agreement that continues until August 2, 1999. The
Distribution Agreement may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the
Fund's NAV per share. The NAVs for the Fund and the Portfolio are calculated by
subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values securities (including options) listed on the
NYSE, the American Stock Exchange or other national securities exchanges or
quoted on Nasdaq, and other securities for which market quotations are readily
37
<PAGE>
available, at the last sale price on the day the securities are being valued. If
there is no reported sale of such a security on that day, the security is valued
at the mean between its closing bid and asked prices on that day. The Portfolio
values all other securities and assets, including restricted securities, by a
method that the trustees of Equity Managers Trust believe accurately reflects
fair value.
If NB Management believes that the price of a security obtained
under the Portfolio's valuation procedures (as described above) does not
represent the amount that the Portfolio reasonably expects to receive on a
current sale of the security, the Portfolio will value the security based on a
method that the trustees of the corresponding Managers Trust believe accurately
reflects fair value.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem the Fund's shares may be suspended or payment
of the redemption price postponed (1) when the NYSE is closed, (2) when trading
on the NYSE is restricted, (3) when an emergency exists as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities it owns
or fairly to determine the value of its net assets, or (4) for such other period
as the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended, the
Plan may withdraw its offers of redemption, or it will receive payment at the
NAV per share in effect at the close of business on the first day the NYSE is
open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor
any request for redemption (or a combination of requests from the Plan in any
90-day period) exceeding $250,000 or 1% of the net assets of the Fund, whichever
is less, by making payment in whole or in part in securities valued as described
under "Share Prices and Net Asset Value" above. If payment is made in
securities, the Plan generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to the Plan substantially all of its share
of any net investment income (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
currency transactions earned or realized by the Portfolio. The Portfolio's net
investment income consists of all income accrued on portfolio assets less
accrued expenses, but does not include capital and foreign currency gains and
38
<PAGE>
losses. Net investment income and realized gains and losses are reflected in the
Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The
Fund calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Plan elects to receive them in cash
("cash election"). A cash election remains in effect until the Plan notifies the
Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the
Code, the Fund must distribute to the Plan for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Hedging Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by NB Management
have received rulings from the Internal Revenue Service ("Service") that each
such fund, as an investor in its corresponding portfolio, will be deemed to own
a proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, NB Management believes that the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax
("Excise Tax") to the extent it fails to distribute by the end of any calendar
year substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
39
<PAGE>
See the next section for a discussion of the tax consequences to
the Fund of distributions to it from the Portfolio, investments by the Portfolio
in certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
Certain portfolios managed by NB Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio, NB Management believes the reasoning thereof and, hence, their
conclusion apply to the Portfolio as well. As a result, the Portfolio is not
subject to federal income tax; instead, each investor in the Portfolio, such as
the Fund, is required to take into account in determining its federal income tax
liability its share of the Portfolio's income, gains, losses, deductions, and
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolio also is not subject to Delaware or New York income
or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to
a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and capital gains and decreased by (1) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (2) the Fund's share
of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains
realized by the Portfolio, may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax treaties between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
40
<PAGE>
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder (effective
for the taxable year beginning September 1, 1998) -- that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to the Plan. The balance of the Fund's share of the PFIC income
will be included in its investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to the Plan.
If the Portfolio invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund ("QEF")," then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of
stock in any PFIC may elect to include in ordinary income each taxable year the
excess, if any, of the fair market value of the stock over the adjusted basis
therein as of the end of that year. Pursuant to the election, a deduction (as an
ordinary, not capital, loss) also would be allowed for the excess, if any, of
the holder's adjusted basis in PFIC stock over the fair market value thereof as
of the taxable year-end, but only to the extent of any net mark-to-market gains
with respect to that stock included in income for prior taxable years. The
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolio's use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses the
Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Hedging Instruments derived by the Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts and
listed options thereon ("Section 1256 contracts") are required to be marked to
market (that is, treated as having been sold at market value) for federal income
tax purposes at the end of the Portfolio's taxable year. Sixty percent of any
41
<PAGE>
net gain or loss recognized as a result of these "deemed sales," and 60% of any
net realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. [As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.]
The Portfolio may acquire zero coupon securities or other
securities issued with original issue discount ("OID"). As a holder of those
securities, the Portfolio (and, through it, the Fund) must take into income the
OID that accrues on the securities during the taxable year, even if it receives
no corresponding payment on the securities during the year. Because the Fund
annually must distribute substantially all of its investment company taxable
income (including its share of the Portfolio's accrued OID) to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be
required in a particular year to distribute as a dividend an amount that is
greater than its share of the total amount of cash the Portfolio actually
receives. Those distributions will be made from the Fund's (or its share of the
Portfolio's) cash assets or, if necessary, from the proceeds of sales of the
Portfolio's securities. The Portfolio may realize capital gains or losses from
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as the Portfolio's principal broker in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the purchase and sale of
options on its securities.
During the fiscal year ended August 31, 1998, the Portfolio paid
brokerage commissions of $______, of which $_____ was paid to Neuberger Berman.
During the fiscal year ended August 31, 1997, the Portfolio paid brokerage
commissions of $305,640, of which $232,238 was paid to Neuberger Berman. During
the fiscal year ended August 31, 1996, the Portfolio paid brokerage commissions
of $208,834, of which $124,879 was paid to Neuberger Berman.
Transactions in which the Portfolio used Neuberger Berman as
broker comprised ____% of the aggregate dollar amount of transactions involving
the payment of commissions, and ____% of the aggregate brokerage commissions
paid by the Portfolio, during the fiscal year ended August 31, 1998. ____% of
the $_______ paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately $__________)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 1998, the Portfolio acquired securities of the
following of its "regular brokers or dealers" (as defined in the 1940 Act):
42
<PAGE>
State Street Bank and Trust Company, N.A.; at that date, that Portfolio held
none of the securities of its regular brokers or dealers.
Prior to June 15, 1998, Portfolio securities were, from time to
time, loaned by the Portfolio to Neuberger Berman in accordance with the terms
and conditions of an order issued by the SEC. The order exempts such
transactions from provisions of the 1940 Act that would otherwise prohibit such
transactions, subject to certain conditions.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio. The following information reflects interest income earned by the
Portfolios from the cash collateralization of securities loans during the fiscal
years ended 1998, 1997, and 1996. As reflected below, Neuberger Berman received
a portion of the interest income from the cash collateral.
Interest Income from
Collateralization of Amount Paid to
NAME OF PORTFOLIO FISCAL YEAR END SECURITIES LOANS NEUBERGER BERMAN
Neuberger Berman 8/31/98 $ ________ $ ________
SOCIALLY RESPONSIVE 8/31/97 $ 80,484 $ 51,639
Portfolio 8/31/96 $ 0 $ 0
- --------------------------------------------------------------------------------
In effecting securities transactions, the Portfolio generally
seeks to obtain the best price and execution of orders. Commission rates, being
a component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
The use of Neuberger Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to
Neuberger Berman in connection with a purchase or sale of securities on a
securities exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
Berman must, in NB Management's judgment, be (1) at least as favorable as those
charged by other brokers having comparable execution capability and (2) at least
43
<PAGE>
as favorable as commissions contemporaneously charged by Neuberger Berman on
comparable transactions for its most favored unaffiliated customers, except for
accounts for which Neuberger Berman acts as a clearing broker for another
brokerage firm and customers of Neuberger Berman considered by a majority of the
Independent Portfolio Trustees not to be comparable to the Portfolio. The
Portfolio does not deem it practicable and in its best interests to solicit
competitive bids for commissions on each transaction effected by Neuberger
Berman. However, consideration regularly is given to information concerning the
prevailing level of commissions charged by other brokers on comparable
transactions during comparable periods of time. The 1940 Act generally prohibits
Neuberger Berman from acting as principal in the purchase of portfolio
securities from, or the sale of portfolio securities to, the Portfolio unless an
appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a portion
of its transactions through brokers other than Neuberger Berman. In selecting
those brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by those brokers.
A committee comprised of officers of NB Management and principals
of Neuberger Berman who are portfolio managers of the Portfolio and/or Other NB
Funds (collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed Accounts") evaluates semi-annually the nature and quality of the
brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
44
<PAGE>
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may
be higher than the amount another firm might charge if NB Management determines
in good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolio's benefit.
Janet W. Prindle, a Vice President of NB Management and a
principal of Neuberger Berman is the person primarily responsible for making
decisions as to specific action to be taken with respect to the investment
portfolio of the Portfolio. She has full authority to take action with respect
to portfolio transactions and may or may not consult with other personnel of NB
Management prior to taking such action. If Ms. Prindle is unavailable to perform
her responsibilities, Robert Ladd and/or Ingrid Saukaitis, each of whom is an
Assistant Vice President of NB Management, will assume responsibility for the
Portfolio.
PORTFOLIO TURNOVER
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
accountants for the Fund and Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
45
<PAGE>
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
THE FUND
The Fund is a separate ongoing series of Equity Trust, a Delaware
business trust organized pursuant to a Trust Instrument dated as of May 6, 1993.
The Trust is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, commonly known as a mutual
fund. Equity Trust has eight separate series. The Fund invests all of net
investable assets in the Portfolio, in each case receiving a beneficial interest
in the Portfolio. The trustees of the Trust may establish additional series or
classes of shares without the approval of shareholders. The assets of the series
belong only to that series, and the liabilities of each series are borne solely
by that series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an
unlimited number of shares of beneficial interest (par value $0.001 per share).
Shares of the Fund represent equal proportionate interests in the assets of the
Fund only and have identical voting, dividend, redemption, liquidation, and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other rights to subscribe to any additional
shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to
hold annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund shares can be bought, owned and sold only
through an account with the Plan, a client of the Plan may be unable to purchase
additional shares and/or may be required to redeem shares (and possibly incur a
tax liability) if the client no longer has a relationship with the Plan or if
the Plan no longer has a contract with NB Management to perform services.
THE PORTFOLIO
The Portfolio is a separate operating series of Equity Managers
Trust, a New York common law trust organized as of December 1, 1992. The Manager
46
<PAGE>
Trust is registered under the 1940 Act as a diversified, open-end management
investment company. Equity Managers Trust has seven separate Portfolios. The
assets of the Portfolio belong only to the Portfolio, and the liabilities of the
Portfolio are borne solely by the Portfolio and no other.
FUND INVESTMENTS IN THE PORTFOLIO. The Fund is a "feeder fund"
that seeks to achieve its investment objective by investing all of its net
investable assets in the Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. The Sister Funds that are series of
Neuberger Berman Equity Funds ("Equity Funds") and the other mutual funds that
are series of other trusts invest all of their respective net assets in
corresponding Portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are available for purchase by members of the general public. The
Trusts do not sell their shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or
other institutional investors to invest in the Portfolio. All investors will
invest in the Portfolio on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the series of Equity Funds) are not required to sell their
shares at the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and (except Equity Funds) might
charge a sales commission. Therefore, Fund shareholders may have different
returns than shareholders in another investment company that invests exclusively
in the Portfolio. Information regarding the Funds that invest in the Portfolio
is available from NB Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the
Portfolio by a series of Equity Funds or by other potential investors in
addition to the Fund may enable the Portfolio to realize economies of scale that
could reduce its operating expenses, thereby producing higher returns and
benefiting all shareholders. However, the Fund's investment in its corresponding
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor in the Portfolio (other than
the Fund) redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from its
corresponding Portfolio at any time, if the trustees of the respective Trust
determine that it is in the best interests of the Fund and its shareholders to
do so. The Fund might withdraw, for example, if there were other investors in
the Portfolio with power to, and who did by a vote of all investors (including
the Fund), change the investment objective, policies, or limitations of the
Portfolio in a manner not acceptable to the trustees of the respective Trust. A
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio to the Fund. That distribution
could result in a less diversified portfolio of investments for the Fund and
47
<PAGE>
could affect adversely the liquidity of the Fund's investment portfolio. If the
Fund decided to convert those securities to cash, it usually would incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the trustees of the respective Trust would consider what
actions might be taken, including the investment of all of the Fund's net
investable assets in another pooled investment entity having substantially the
same investment objective as the Fund or the retention by the Fund of its own
investment manager to manage its assets in accordance with its investment
objective, policies, and limitations. The inability of the Fund to find a
suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not
hold meetings of investors except as required by the 1940 Act. Each investor in
the Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the
Fund, will be liable for all obligations of the Portfolio. However, the risk of
an investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for
their securities and cash. State Street also serves as the Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares and
the payment of dividends and other distributions to the Plan. All correspondence
should be mailed to the Plan, 40 Rector Street, 3rd Floor, New York, NY 10006.
In addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected PricewaterhouseCoopers., One
Post Office Square, Boston, MA 02109, as the independent accountants who will
audit their financial statements.
48
<PAGE>
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1998, the Deferred Compensation Plan of the
City of New York and Related Agencies and Instrumentalities, 40 Rector Street,
3rd Floor, New York, New York 10006, owned [100]% of the outstanding shares of
the Fund; and the Fund held _____% of the interests in the Portfolio.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
[To be filed.]
49
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only in small
degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issue.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes
and are considered to be as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the future.
50
<PAGE>
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's commercial paper ratings:
Issuers rated PRIME-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
51
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: None.
(b) Exhibits:
Exhibit Description
Number
(a) (1) Certificate of Trust. Incorporated by Reference
to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-95-
000427.
(2) Trust Instrument of Neuberger Berman Equity
Trust. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-95-000427.
(3) Schedule A - Current Series of Neuberger Berman
Equity Trust. Incorporated by Reference to
Post-Effective Amendment No. 16 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-98-000681.
(b) By-laws of Neuberger Berman Equity Trust. Incorporated
by Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-95-000427.
(c) (1) Trust Instrument of Neuberger Berman Equity
Trust, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-95-000427.
(2) By-laws of Neuberger Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, EDGAR Accession No.
0000898432-95-000427.
(d) (1) (i) Management Agreement Between Equity
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-000314.
<PAGE>
Exhibit Description
Number
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 16 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-98-000681.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
16 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Incorporated and
Neuberger Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 16 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-98-000681.
(iii) Substitution Agreement Among Neuberger
Berman Management Incorporated, Equity
Managers Trust, Neuberger Berman, L.P., and
Neuberger Berman, LLC. Incorporated by
Reference to Amendment No. 7 to
Registration Statement of Equity Managers
Trust, File No. 811-7910, EDGAR Accession
No. 0000898432-96-000557.
(3) (i) Management Agreement Between Global
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-95-000426.
<PAGE>
Exhibit Description
Number
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
74 to Registration Statement of Neuberger
Berman Equity Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000426.
(4) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Incorporated and
Neuberger Berman, LLC with Respect to
Global Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-000426.
(iii) Substitution Agreement among Neuberger
Berman Management Incorporated, Global
Managers Trust, Neuberger Berman, L.P. and
Neuberger Berman, LLC. Incorporated by
Reference to the substantially similar
agreement filed in Amendment No. 7 to the
Registration Statement of Equity Managers
Trust, File No. 811-7910, EDGAR Accession
No. 0000898432-96-000557 (the documents
differ only with respect to the date of and
the master fund party to the subadvisory
agreement under which substitution is
sought and the name of the executing master
fund).
(e) (1) Distribution Agreement Between Neuberger Berman
Equity Trust and Neuberger Berman Management
Incorporated. Incorporated by Reference to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-97-000519.
(2) Schedule A - Series of Neuberger Berman Equity Trust
Currently Subject to the Distribution Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(f) Bonus, Profit Sharing or Pension Plans. None.
<PAGE>
Exhibit Description
Number
(g) (1) Custodian Contract Between Neuberger Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-95-
000427.
(2) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to Post-
Effective No. 10 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-96-000532.
(3) Agreement Between Neuberger Berman Equity Trust
and State Street Bank and Trust Company Adding
Neuberger Berman International Trust as a
Portfolio Governed by the Custodian Contract.
Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No.
0000898432-97-000398.
(h) (1) (i) Transfer Agency and Service Agreement Between
Neuberger Berman Equity Trust and State Street
Bank and Trust Company. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-95-
000427.
(ii) Agreement Between Neuberger Berman Equity Trust
and State Street Bank and Trust Company Adding
Neuberger Berman NYCDC Socially Responsive Trust
as a Portfolio Governed by the Transfer Agency
Agreement. Incorporated by Reference to Post-
Effective No . 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-95-000427.
(iii) Agreement Between Neuberger Berman Equity Trust
and State Street Bank and Trust Company Adding
Neuberger Berman International Trust as a
Portfolio Governed by the Transfer Agency and
Service Agreement. Incorporated by reference to
Post-Effective Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-97-000398.
(iv) First Amendment to Transfer Agency and Service
Agreement between Neuberger Berman Equity Trust
and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective No. 8
to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, EDGAR Accession No.
0000898432-95-000427.
(v) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated by
Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, EDGAR Accession No.
0000898432-96-000-532.
<PAGE>
Exhibit Description
Number
(vi) Second Amendment to Transfer Agency and Service
Agreement between Neuberger Berman Equity Trust
and State Street Bank and Trust Company.
Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-97-000398.
(2) (i) Administration Agreement Between Neuberger Berman
Equity Trust and Neuberger Berman Management
Incorporated. Incorporated by Reference to Post-
Effective Amendment No. 13 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No . 0000898432-97-
000519.
(ii) Schedule A - Series of Neuberger Berman Equity
Trust Currently Subject to the Administration
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 16 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-98-
000681.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-95-000427.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP
on Securities Matters with Respect to Neuberger Berman
Equity Trust. Incorporated by Reference to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-97-000519.
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP
on Securities Matters with Respect to Neuberger Berman
NYDC Socially Responsive Trust. Incorporated by
Reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement, File Nos. 33-64368
and 811-7784,EDGAR Accession No. 0000898432-97-000519.
(j) Consent of Independent Auditors. None.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. None.
(o) Plan Pursuant to Rule 18f-3. None.
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is controlled by or under common control with the
Registrant. (Registrant is organized in a master/feeder structure and
technically may be considered to control the master fund in which it invests,
Equity Managers Trust.)
ITEM 25. INDEMNIFICATION.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("NB Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or their interest holders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
<PAGE>
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant on behalf of
such Series, and neither the Trustees nor any of the Registrant's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISER AND SUB-ADVISER.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of NB Management and each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
NAME BUSINESS AND OTHER CONNECTIONS
Claudia A. Brandon Secretary, Neuberger Berman Advisers
Vice President, NB Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger Berman
Income Funds; Secretary, Neuberger Berman
Income Trust; Secretary, Neuberger Berman
Equity Funds; Secretary, Neuberger Berman
Equity Trust; Secretary, Income Managers
Trust; Secretary, Equity Managers Trust;
Secretary, Global Managers Trust; Secretary,
Neuberger Berman Equity Assets; Secretary,
Neuberger Berman Equity Series.
Valerie Chang, Senior Securities Analyst, TIAA/CREF.1
Assistant Vice President, NB
Management
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, NB International Investors.2 Senior Vice
Management President and Senior Portfolio Manager,
Putnam Investments.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger Berman.
__________________
1/ Until 1996.
2/ Until 1997.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman Equity
Series.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, NB Management Investments.3
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
Stanley Egener Chairman of the Board and Trustee, Neuberger
President and Director, Berman Advisers Management Trust; Chairman
NB Management; Principal, of the Board and Trustee, Advisers Managers
Neuberger Berman Trust; Chairman of the Board and Trustee,
Neuberger Berman Income Funds; Chairman of
the Board and Trustee, Neuberger Berman
Income Trust; Chairman of the Board and
Trustee, Neuberger Berman Equity Funds;
Chairman of the Board and Trustee, Neuberger
Berman Equity Trust; Chairman of the Board
and Trustee, Income Managers Trust; Chairman
of the Board and Trustee, Equity Managers
Trust; Chairman of the Board and Trustee,
Global Managers Trust; Chairman of the Board
and Trustee, Neuberger Berman Equity Assets;
Chairman of the Board and Trustee, Neuberger
Berman Equity Series.
Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President and Income Funds; President and Trustee,
Director, NB Management; Neuberger Berman Income Trust; President and
Principal, Neuberger Berman Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger Berman
Principal, Neuberger Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
___________________
3/ Until 1996.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman Equity
Series.
Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger Berman
Income Funds; Treasurer, Neuberger Berman
Income Trust; Treasurer, Neuberger Berman
Equity Funds; Treasurer, Neuberger Berman
Equity Trust; Treasurer, Income Managers
Trust; Treasurer, Equity Managers Trust;
Treasurer, Global Managers Trust; Treasurer,
Neuberger Berman Equity Assets; Treasurer,
Neuberger Berman Equity Series.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities4
NB Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, NB Investments.5
Management; Principal,
Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
_______________
4/ Unitl 1997.
5/ Until 1997.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Celeste Wischerth, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
Lawrence Zicklin President and Trustee, Neuberger Berman
Director, NB Management; Advisers Management Trust; President and
Principal, Neuberger Berman Trustee, Advisers Managers Trust; President
and Trustee, Neuberger Berman Equity Funds;
President and Trustee, Neuberger Berman
Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers
Trust; President and Trustee, Neuberger
Berman Equity Assets; President and Trustee,
Neuberger Berman Equity Series.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) NB Management, the principal underwriter distributing securities
of the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Funds
Neuberger Berman Equity Assets
Neuberger Berman Equity Series
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Ramesh Babu Assistant Vice President None
Claudia A. Brandon Vice President Secretary
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Vice President None
Stanley Egener President and Director Chairman of the Board,
Chief Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Leslie Holliday-Soto Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
S. Basu Mullick Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Allan R. White, III Vice President None
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas G. Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes
of meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
<PAGE>
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
ITEM 29. MANAGEMENT SERVICES
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
ITEM 30. UNDERTAKINGS
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY TRUST
has duly caused this Post-Effective Amendment No. 17 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 21st day of October, 1998.
NEUBERGER & BERMAN EQUITY TRUST
By:/s/ LAWRENCE ZICKLIN
--------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 17 has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ FAITH COLISH Trustee October 21, 1998
- ------------------
Faith Colish
/s/ STANLEY EGENER Chairman of the Board October 21, 1998
- ------------------ and Trustee (Chief
Stanley Egener Executive Officer)
/s/ HOWARD A. MILEAF Trustee October 21, 1998
- --------------------
Howard A. Mileaf
/s/ EDWARD I. O'BRIEN Trustee October 21, 1998
- ---------------------
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JOHN T. PATTERSON Trustee October 21, 1998
- ---------------------
John T. Patterson, Jr.
/s/ JOHN P. ROSENTHAL Trustee October 21, 1998
- ---------------------
John P. Rosenthal
___________________ Trustee
Cornelius T. Ryan
/s/ GUSTAVE H. SHUBERT Trustee October 21, 1998
- ----------------------
Gustave H. Shubert
/s/ LAWRENCE ZICKLIN President and Trustee October 21, 1998
- --------------------
Lawrence Zicklin
/s/ MICHAEL J. WEINER Vice President October 21, 1998
- --------------------- (Principal
Michael J. Weiner Financial Officer)
/s/ RICHARD RUSSELL Treasurer (Principal October 21, 1998
- -------------------- Accounting Officer)
Richard Russell
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST has duly caused the
Post-Effective Amendment No. 17 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York on the 21st day of
October, 1998.
EQUITY MANAGERS TRUST
By:/s/ LAWRENCE ZICKLIN
--------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 17 has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ FAITH COLISH Trustee October 21, 1998
- ------------------
Faith Colish
/s/ STANLEY EGENER Chairman of the Board October 21, 1998
- ------------------ and Trustee (Chief
Stanley Egener Executive Officer)
/s/ HOWARD A. MILEAF Trustee October 21, 1998
- --------------------
Howard A. Mileaf
/s/ EDWARD I. O'BRIEN Trustee October 21, 1998
- ---------------------
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JOHN T. PATTERSON Trustee October 21, 1998
- ---------------------
John T. Patterson, Jr.
/s/ JOHN P. ROSENTHAL Trustee October 21, 1998
- ---------------------
John P. Rosenthal
___________________ Trustee
Cornelius T. Ryan
/s/ GUSTAVE H. SHUBERT Trustee October 21, 1998
- ----------------------
Gustave H. Shubert
/s/ LAWRENCE ZICKLIN President and Trustee October 21, 1998
- --------------------
Lawrence Zicklin
/s/ MICHAEL J. WEINER Vice President October 21, 1998
- --------------------- (Principal
Michael J. Weiner Financial Officer)
/s/ RICHARD RUSSELL Treasurer (Principal October 21, 1998
- -------------------- Accounting Officer)
Richard Russell
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 17 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(a) (1) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-95-000427.
(2) Trust Instrument of Neuberger Berman Equity N.A.
Trust. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, EDGAR Accession
No. 0000898432-95-000427.
(3) Schedule A - Current Series of Neuberger N.A.
Berman Equity Trust. Incorporated by
Reference to Post-Effective Amendment No. 16
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-98-000681.
(b) By-laws of Neuberger Berman Equity Trust. N.A.
Incorporated by Reference to Post-Effective No. 8
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-95-000427.
(c) (1) Trust Instrument of Neuberger Berman N.A.
Equity Trust, Articles IV, V, and VI.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
EDGAR Accession No. 0000898432-95-000427
(2) Bylaws of Neuberger Berman Equity
Trust, Articles V, VI, and VIII.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
EDGAR Accession No. 0000898432-95-000427.
(d) (1) (i) Management Agreement Between Equity N.A.
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated
by Reference to Post-Effective
Amendment No. 70 to Registration
Statement of Neuberger Berman Equity
Funds, File Nos. 2-11357 and 811-582,
EDGAR Accession No. 0000898432-000314.
(ii) Schedule A - Series of Neuberger N.A.
Berman Equity Managers Trust Currently
Subject to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(2) (i) Sub-Advisory Agreement Between N.A.
Neuberger Berman Management
Incorporated and Neuberger Berman, LLC
with Respect to Equity Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger
Berman Equity Funds, File Nos. 2-11357
and 811-582, EDGAR Accession No.
0000898432-000314.
(ii) Schedule A - Series of Neuberger N.A.
Berman Equity Managers Trust Currently
Subject to the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(3) (i) Management Agreement Between Global
Managers Trust and Neuberger Berman
Management, Incorporated by Reference N.A.
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated
by Reference to Post-Effective N.A.
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, EDGAR Accession
No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to N.A.
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(4) (i) Sub-Advisory Agreement Between
Neuberger Berman Management
Incorporated and Neuberger Berman,
LLC with Respect to Global Managers N.A.
Trust. Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the N.A.
Sub-Advisory Agreement, Incorporated
by Reference to Post-Effective
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, EDGAR Accession
No. 0000898432-95-000426.
(e) (1) Distribution Agreement Between Neuberger Berman N.A.
Equity Trust and Neuberger Berman Management.
Incorporated by Reference to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-97-000519.
(2) Schedule A - Series of Neuberger Berman Equity N.A.
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 16 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-98-000681.
(f) Bonus, Profit Sharing or Pension Plans. None. N.A.
(g) (1) Custodian Contract Between Neuberger Berman N.A.
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, EDGAR Accession
No. 0000898432-95-000427. N.A.
(2) Schedule of Compensation Under the Custodian
Contract. Incorporated by Reference to
Post-Effective No. 10 to Registrant's
Registration Statement, File Nos. 33-64368 N.A.
and 811-7784, EDGAR Accession No.
0000898432-96-000532.
(3) Agreement Between Neuberger Berman Equity
Trust and State Street Bank Trust Company N.A.
Adding Neuberger Berman International Trust
as a Portfolio Governed by the Custodian
Contract. Incorporated by reference to
Post-Effective Amendment No. 12 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-97-000398.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(h) (1) (i) Transfer Agency and Service Agreement N.A.
Between Neuberger Berman Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
EDGAR Accession No. 0000898432-95-000427. N.A.
(ii) Agreement Between Neuberger Berman Equity
Trust and State Street Bank and Trust
Company Adding Neuberger Berman NYCDC
Socially Responsive Trust as a Portfolio
Governed by the Transfer Agency Agreement.
Incorporated by Reference to Post-Effective N.A.
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
EDGAR Accession No. 0000898432-95-000427.
(iii) Agreement Between Neuberger Berman Equity Trust and State
Street Bank and Trust Company Adding Neuberger Berman
International Trust as a Portfolio Governed by the Transfer
Agency Agreement. Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession No.
0000898432-97-000398.
(iv) First Amendment to Transfer Agency and N.A. Service Agreement
between Equity Trust and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-95-000427.
(v) Schedule of Compensation under the Transfer N.A.
Agency and Service Agreement. Incorporated
by Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-96-000532.
(vi) Second Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, EDGAR Accession No.
0000898432-97-000398.
(2) (i) Administration Agreement Between Neuberger N.A.
Berman Equity Trust and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 13
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-97-000519.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(ii) Schedule A - Series of Neuberger Berman N.A.
Equity Trust Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post-Effective Amendment No. 16
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-98-000681.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-95-000427.
(i) (a) Opinion and Consent of Kirkpatrick & N.A. Lockhart LLP on
Securities Matters with Respect to Neuberger Berman Equity Trust.
Incorporated by Reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement, File Nos. 33-64368 and 811-7784,
EDGAR Accession No. 0000898432-97-000519.
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP on Securities
Matters with Respect to Neuberger Berman NYDC Socially Responsive
Trust. Incorporated by Reference to Post-Effective Amendment No. 13
to Registrant's Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-97-000519.
(j) Consent of Independent Auditors. None. N.A.
(k) Financial Statements Omitted from Prospectus. None. N.A.
(l) Letter of Investment Intent. None. N.A.
(m) Plan Pursuant to Rule 12b-1. None. N.A.
(n) Financial Data Schedule. None. N.A.
(o) Plan Pursuant to Rule 18f-3. None. N.A.
<PAGE>
